A Hong Kong securities industry group has pushed back against key parts of the city’s proposed regulatory framework for virtual asset management, warning that theA Hong Kong securities industry group has pushed back against key parts of the city’s proposed regulatory framework for virtual asset management, warning that the

Hong Kong Industry Group Pushes Back on Tougher Crypto Manager Rules

4 min read
  • The HKSFPA objected to proposals that abolished the 10% crypto allocation threshold applicable in Hong Kong for Type 9 managers.
  • The proposed regulations may demand a full license even for limited cryptocurrency involvement.
  • Custody requirements can potentially damage VC and early investor entry into token investment opportunities unless accommodating solutions emerge.

A Hong Kong securities industry group has pushed back against key parts of the city’s proposed regulatory framework for virtual asset management, warning that the plan could discourage traditional asset managers from gaining exposure to cryptocurrencies.

In a Tuesday submission to regulators, the Hong Kong Securities and Futures Professionals Association (HKSFPA) criticized proposals that would tighten licensing requirements for portfolio managers. The group argued that the draft rules create an “all-or-nothing” compliance burden that could stop traditional firms from testing crypto exposure through small allocations.

Hong Kong authorities have been consulting the market on additional licensing regimes for virtual asset dealing, advisory, and management services, as the city expands its broader digital asset policy push. Already, regulators have made progress regarding frameworks for virtual asset trading systems and issuers of stablecoins, and now new regulations are emerging regarding fund management and custody activities.

Removal of the 10% threshold draws the sharpest criticism

HKSFPA focused much of its feedback on the plan to remove the existing “de minimis” threshold for managers with a Type 9 license, the SFC registration category covering discretionary portfolio and asset management.

Under current arrangements, Type 9 licensed firms can allocate less than 10% of a fund’s gross asset value to crypto assets without applying for a separate license uplift, as long as they notify the regulator. According to guidance cited by Hong Kong-based law firm JunHe, this approach has allowed traditional asset managers to gain limited crypto exposure while keeping risk and compliance costs in balance.

However, regulators are now proposing to scrap that threshold entirely. Under the updated plan, even a minimal allocation, such as a 1% holding in Bitcoin, would require managers to secure a full virtual asset management license.

HKSFPA called the approach disproportionate. The group warned that it would impose significant compliance costs regardless of actual exposure size, which could deter fund managers from experimenting with crypto as an emerging asset class.

Expanded licensing could widen the regulatory perimeter

JunHe lawyers also highlighted how the proposed framework could significantly expand the scope of firms that fall under licensing requirements.

Some asset managers that run portfolios made up entirely of digital assets do not currently hold Type 9 licenses because their work does not fit neatly into the traditional definition of managing securities portfolios. Under the proposed regime, those firms would also need to obtain a virtual asset management license, which would widen regulatory coverage across crypto-native investment vehicles.

That shift could reshape how Web3 funds operate in Hong Kong, particularly specialist managers that have historically relied on lighter-touch classifications.

Custody rules could disrupt VC and early-stage token investing

HKSFPA also criticized the proposed custody framework. The draft rules would require virtual asset managers to hold client assets only with SFC-licensed custodians.

The association warned that this requirement would create practical issues for private equity and venture capital funds, especially those investing in early-stage or newly issued tokens. Many local custodians do not support these assets during early lifecycle stages, which could block Hong Kong-based funds from participating in Web3 venture deals.

HKSFPA argued that a strict custody mandate could effectively prevent Hong Kong managers from running Web3-focused VC funds, even when investors understand the risks and accept specialist custody approaches.

Meanwhile, the industry organization supported the consideration by regulators of more flexible alternatives, such as permitting self-custody in a limited fashion and allowing the use of qualified offshore custodians when serving professional investors.

Hong Kong balances hub ambitions with tighter supervision

The announcement comes at a time when Hong Kong is increasing its pace to emerge as an Asian leader in the cryptocurrency market. The Hong Kong Monetary Authority has introduced licenses for exchanges, as well as for stablecoin providers.

However, feedback of this kind from the industry, such as what has been seen in HKSFPA’s feedback, shows that what the market desires is regulation commensurate to risk rather than regulation that seeks to haul all crypto-related activity into a costly regulatory orbit. The consultations have brought about a new era of negotiations between policymakers and industry participants.

Highlighted Crypto News:

NYSE Moves Toward 24/7 Markets With Blockchain Trading Venue for Tokenized Equities

Market Opportunity
CyberKongz Logo
CyberKongz Price(KONG)
$0.001956
$0.001956$0.001956
0.00%
USD
CyberKongz (KONG) Live Price Chart
Disclaimer: The articles reposted on this site are sourced from public platforms and are provided for informational purposes only. They do not necessarily reflect the views of MEXC. All rights remain with the original authors. If you believe any content infringes on third-party rights, please contact service@support.mexc.com for removal. MEXC makes no guarantees regarding the accuracy, completeness, or timeliness of the content and is not responsible for any actions taken based on the information provided. The content does not constitute financial, legal, or other professional advice, nor should it be considered a recommendation or endorsement by MEXC.

You May Also Like

Optimizely Named a Leader in the 2026 Gartner® Magic Quadrant™ for Personalization Engines

Optimizely Named a Leader in the 2026 Gartner® Magic Quadrant™ for Personalization Engines

Company recognized as a Leader for the second consecutive year NEW YORK, Feb. 5, 2026 /PRNewswire/ — Optimizely, the leading digital experience platform (DXP) provider
Share
AI Journal2026/02/06 00:47
Elizabeth Warren raises ethics concerns over White House crypto czar David Sacks’ tenure

Elizabeth Warren raises ethics concerns over White House crypto czar David Sacks’ tenure

The post Elizabeth Warren raises ethics concerns over White House crypto czar David Sacks’ tenure appeared on BitcoinEthereumNews.com. Democratic lawmakers pressed David Sacks, President Donald Trump’s “crypto and AI czar,” on Sept. 17 to disclose whether he has exceeded the time limits of his temporary White House appointment, raising questions about possible ethics violations. In a letter signed by Senator Elizabeth Warren and seven other members of Congress, the lawmakers said Sacks may have surpassed the 130-day cap for Special Government Employees, a category that allows private-sector professionals to serve the government on a part-time or temporary basis. The Office of Government Ethics sets the cap to minimize conflicts of interest, as SGEs are permitted to continue receiving outside salaries while in government service. Warren has previously raised similar concerns around Sacks’ appointment. Conflict-of-interest worries Sacks, a venture capitalist and general partner at Craft Ventures, has played a high-profile role in shaping Trump administration policy on digital assets and artificial intelligence. Lawmakers argued that his private financial ties to Silicon Valley raise serious ethical questions if he is no longer within the bounds of SGE status. According to the letter: “When issuing your ethics waiver, the White House noted that the careful balance in conflict-of-interest rules for SGEs was reached with the understanding that they would only serve the public ‘on a temporary basis. For you in particular, compliance with the SGE time limit is critical, given the scale of your conflicts of interest.” The group noted that Sacks’ private salary from Craft Ventures is permissible only under the temporary provisions of his appointment. If he has worked past the legal limit, the lawmakers warned, his continued dual roles could represent a breach of ethics. Counting the days According to the letter, Sacks was appointed in December 2024 and began working around Trump’s inauguration on Jan. 20, 2025. By the lawmakers’ calculation, he reached the 130-day threshold in…
Share
BitcoinEthereumNews2025/09/18 07:37
Exclusive interview with Smokey The Bera, co-founder of Berachain: How the innovative PoL public chain solves the liquidity problem and may be launched in a few months

Exclusive interview with Smokey The Bera, co-founder of Berachain: How the innovative PoL public chain solves the liquidity problem and may be launched in a few months

Recently, PANews interviewed Smokey The Bera, co-founder of Berachain, to unravel the background of the establishment of this anonymous project, Berachain's PoL mechanism, the latest developments, and answered widely concerned topics such as airdrop expectations and new opportunities in the DeFi field.
Share
PANews2024/07/03 13:00