Hong Kong's Crypto Asset Management New Regulations Face Industry Resistance, Association Warns One-Size-Fits-All Licensing Requirement May Stifle Innovation

BlockBeats News, January 20th - The Hong Kong securities industry group has raised concerns about the city's proposed digital asset management regulatory framework, warning that the related reforms could hinder traditional asset management institutions from entering the cryptocurrency space.

The Hong Kong Securities and Futures Professional Association expressed opposition in a submission to the regulators on Tuesday to a proposed regulatory adjustment that would eliminate the existing "minimum exemption threshold" for Type 9 asset managers. Under the current framework, institutions holding a Type 9 license (covering discretionary portfolio management and asset management businesses) that allocate less than 10% of the total fund assets to crypto assets only need to report to the regulators without the need to apply for an additional license upgrade.

The Hong Kong Securities and Futures Professional Association pointed out that the proposed reform would eliminate this threshold, meaning that even a 1% allocation to Bitcoin would require a full virtual asset management license. The industry group stated that this "all or nothing" regulatory approach lacks a proportionality principle, believing that even in cases of limited exposure to risk, substantial compliance costs would still be incurred, potentially hindering traditional management institutions from exploring the cryptocurrency asset class.

This industry backlash is directed at a regulatory framework that is already in the fast lane. Last December, after launching a public consultation in June, Hong Kong authorities released a consultation summary report on the related reform proposals. The Hong Kong Treasury and the Securities and Futures Commission have conducted further consultations on introducing a supplementary licensing system for cryptocurrency trading, advisory, and management services.