Hong Kong to License Crypto Trading and Custody by 2026 to Build Asian Crypto Hub
Hong Kong’s Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) will introduce a unified licensing regime for virtual-asset (VA) dealers, custodians, brokers and advisors, targeting legislation submission to the Legislative Council in 2026. The draft framework—reshaped by more than 190 consultation responses—aligns with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and applies a “same business, same risk, same rule” principle to extend securities-style broker standards to crypto trading services. Key requirements will include strict custody safeguards for private key management and asset segregation, broker compliance obligations for OTC desks and trading intermediaries, and licensing of advisory and asset-management services (a separate one-month consultation is open). The SFC is already progressing related measures: consultations on OTC licence rules, reviews of derivatives and margin trading, approval of staking services under strict asset-control rules, and allowance of spot crypto ETFs since 2024. The unified 2026 regime aims to attract institutional capital by creating licensed, auditable market infrastructure, reducing counterparty and custody risk, and positioning Hong Kong competitively against regional hubs such as Singapore and the mainland’s restrictive stance. For traders: expect clearer market access for institutional flows, higher custody and compliance standards for counterparties, potential tightening of OTC and margin activities, and a platform for more complex products (tokenised securities, structured derivatives) that could increase liquidity and product sophistication over the medium term.
Bullish
The proposed licensing regime reduces regulatory uncertainty and addresses custody and counterparty risks that have previously deterred institutional participation. By imposing securities-style broker and custodian standards—private-key controls, asset segregation, AML/CTF alignment—and extending oversight to OTC desks, advisors and asset managers, Hong Kong is creating clearer, auditable pathways for institutional inflows. Short-term effects may include elevated compliance costs for service providers, potential consolidation among OTC and custody vendors, and temporary liquidity shifts as counterparties adjust. Over the medium to long term, however, the clearer regulatory framework and permissioning of tokenised products, staking under controlled rules, and recognised spot ETF activity should increase institutional demand and product liquidity, which is typically bullish for major spot-traded cryptocurrencies. The net market impact is therefore assessed as bullish, driven by improved institutional access and market infrastructure, though volatility could rise during implementation and enforcement phases.