Hong Kong Expands Crypto Licensing: New Regulations for Dealers and Custodians

Hong Kong is updating its regulatory framework for cryptocurrency by implementing new licensing requirements for virtual asset dealers and custodians. This move aims to strengthen oversight of the digital asset market, filling existing regulatory gaps and enhancing investor protection.

Key Takeaways

Hong Kong is expanding its crypto regulatory framework to include licensing for virtual asset dealers and custodians.
The new regime aims to address regulatory gaps in over-the-counter trading, brokerage services, and asset custody.
License requirements will apply to a wide array of services, including conversions and advisory functions.
Dealers must meet a minimum capital requirement of HK$5 million, while custodians will need at least HK$10 million.
Efforts are underway to also regulate virtual asset advisory and management services to align them with traditional finance norms.

Hong Kong Crypto Licensing Expands: Dealers and Custodians Face Strict New Mandate

New Licensing Requirements for Crypto Dealers and Custodians

Hong Kong is advancing its regulatory landscape for cryptocurrencies, having recently finalized consultations on new licensing requirements for virtual asset dealers and custodians. This significant expansion of oversight comes in response to the growing complexity of the crypto market, which has seen many activities migrate beyond licensed exchanges.

The Financial Services and the Treasury Bureau, along with the Securities and Futures Commission (SFC), announced on December 24 that all firms offering virtual asset dealing or custody services will need to secure licenses once these new regulations take effect.

Bringing Brokers and Custodians Under Regulatory Oversight

This initiative follows months of consultations aimed at closing the gaps in regulation that have appeared as cryptocurrency activities evolved to include over-the-counter (OTC) trading, brokerage, and third-party custody services. The SFC confirmed that the new proposals have received broad support in the market and are now set to enter the legislative phase. This step is crucial in establishing a thorough regulatory structure for digital assets in line with the SFC’s ASPIRe roadmap.

All virtual asset dealers will now be regulated similarly to existing securities dealers. The licensing requirements will encompass a range of activities, including conversions between virtual assets and fiat currencies, brokerage services, block trading, and other advisory services, regardless of whether they take place online or in physical locations. This is the first time that OTC trading and brokerage-type services will be subject to regulatory scrutiny.

Custodians will also face a specialized licensing regime targeting the safe custody of client assets. Any entity that manages or controls private keys for client virtual assets in Hong Kong will be required to either obtain a license or register.

Regulators emphasized that the new framework aims to mitigate risks surrounding asset protection. It will mandate strict asset segregation, robust internal controls over key management, elevated cybersecurity standards, and resilient business continuity plans. Dealers must ensure that client assets are placed solely with custodians that are licensed or registered in Hong Kong.

Both licensing regimes will also implement fit-and-proper criteria for applicants, alongside minimum financial resource thresholds. Dealers are expected to maintain capital of approximately HK$5 million, while custodians will need higher capital levels, beginning at HK$10 million in paid-up capital.

Expanding Licensing to Advisors and Managers

In addition to the dealer and custodian licenses, regulators have initiated further discussions on extending licensing to virtual asset advisory and management service providers. This move would subject crypto advisors and asset managers to a regulatory framework akin to that of traditional financial institutions, granting the SFC authority to oversee, inspect, and enforce regulations within this segment of the market.

SFC Chief Executive Officer Julia Leung indicated that this enhanced framework aims to nurture a secure and competitive digital asset environment while upholding robust investor protections.

Regulators encourage firms interested in the new licensing frameworks to engage in pre-application discussions with the SFC to better navigate compliance expectations.

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This latest development builds on a series of regulatory actions taken in the past year. Hong Kong already mandates that crypto trading platforms obtain licenses, with 11 exchanges currently approved under this obligatory regime, which replaced a previous opt-in approach.

Earlier in 2025, the city also implemented its Stablecoin Ordinance, establishing a licensing framework specifically for stablecoin issuers. Furthermore, authorities are working to enhance market access, permitting licensed exchanges to connect with global liquidity pools and relax certain token listing requirements.

The proposed regulations, still in the consulting phase, reflect a cautious strategy that differentiates between regulated stablecoins and more volatile cryptocurrencies.