Hong Kong is preparing another major step in its digital asset strategy, with regulators planning to introduce new legislation in 2026 that would formally license virtual asset dealers and custodians.
The proposal signals a tightening, but also a normalization, of crypto market oversight as the city pushes to align digital assets with traditional financial regulation.
Bringing OTC Crypto Activity Under One Regulatory Umbrella
The planned bill is being developed jointly by Financial Services and the Treasury Bureau and the Securities and Futures Commission. Its core objective is to extend regulatory coverage beyond licensed crypto trading platforms to include over-the-counter (OTC) desks, brokers, and virtual asset custodians.
Under the proposal, firms involved in buying, selling, or underwriting virtual assets would no longer operate in a regulatory gray area. Instead, they would fall under the same supervisory framework already applied to licensed exchanges, strengthening investor protection and reinforcing market integrity.
Dealer Rules Modeled on Traditional Securities Laws
The new licensing regime for virtual asset dealers will be anchored in Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Importantly, the structure will closely mirror the existing rules for Type 1 regulated activity, dealing in securities.
In practice, this means crypto dealers would face compliance expectations similar to traditional securities firms, including governance standards, operational controls, and AML obligations. The goal is consistency: digital assets would be regulated based on activity and risk, rather than treated as an entirely separate financial category.
Stricter Standards for Crypto Custodians
Virtual asset custodians will also be brought under a dedicated licensing regime. According to the proposal, custodians will be required to meet stringent standards around private key management, internal controls, and asset segregation.
These measures are designed to directly address one of the crypto industry’s most persistent risks: the safeguarding of client assets. By imposing clear custody rules, regulators aim to reduce the likelihood of loss, misuse, or operational failures that could harm investors.
Timeline and Next Steps
Public consultations on the dealer and custodian regimes have already concluded, with regulators reporting broad market support. Authorities are now working toward finalizing the legislative framework, with the intention of formally introducing the bill to Hong Kong’s Legislative Council in 2026.
In parallel, regulators have launched a separate consultation covering virtual asset advisory and asset management services. Feedback on that proposal is open until January 23, 2026, suggesting further regulatory expansion is already on the horizon.
Positioning Hong Kong as a Global Crypto Hub
These reforms fit squarely within Hong Kong’s broader digital asset strategy, known as the ASPIRe roadmap, which seeks to position the city as a globally competitive crypto and tokenization hub. The approach contrasts sharply with mainland China’s restrictive stance on crypto markets, underscoring Hong Kong’s role as a regulatory bridge between traditional finance and digital assets.
Rather than banning activity, Hong Kong is opting to regulate it comprehensively, signaling to institutions, service providers, and investors that crypto is being integrated into the financial system, not pushed to the margins.
