Hong Kong Insurers Encounter Full Capital Charge for Direct Bitcoin and Crypto Investments

The Hong Kong Insurance Authority has set out draft regulations that allow insurers to allocate capital for cryptocurrencies under a 100 percent risk charge, marking a significant development as the first explicit framework for this in Asia. This was disclosed in regulatory documents released on December 4.

Key Takeaways

The Hong Kong Insurance Authority has introduced draft regulations permitting insurers to invest in cryptocurrencies with a 100% capital charge.
Insurers must maintain capital equal to their cryptocurrency assets, while stablecoins will have charges based on fiat currencies.
This initiative could significantly increase liquidity in the cryptocurrency market.
The consultation period for these regulations will take place from February to April before final legislation is introduced.
Hong Kong’s regulatory approach differs from those of Singapore, South Korea, and Japan, potentially positioning it as a leader in the region's cryptocurrency landscape.

Hong Kong insurers eye crypto under strict 100% capital rules.

New Regulatory Framework for Cryptocurrencies in Hong Kong

The proposed regulations will require insurers to hold capital equal to the value of their cryptocurrency investments to address regulatory concerns over the volatility and risks associated with digital assets. When it comes to stablecoins, these will have specific risk charges anchored to their corresponding fiat currencies, particularly for those regulated in Hong Kong.

In 2024, the Hong Kong insurance market amassed around HK$635 billion (approximately $82 billion) in gross premiums, with 158 licensed insurers operating in the region. Analysts believe even modest cryptocurrency investments from insurers could bring significant liquidity to the digital asset sector.

According to Bloomberg, the regulatory proposal also includes provisions for infrastructure investments. This framework aims to extend capital incentives for insurers that invest in infrastructure initiatives in both Hong Kong and mainland China, especially around developments in the Northern Metropolis area bordering the mainland.

The Hong Kong Monetary Authority is preparing to roll out initial licenses for stablecoin issuers by early 2025. This licensing framework, launched in August 2024, is part of a larger effort to foster regulatory clarity and support institutional engagement in cryptocurrency.

LATEST: 🇭🇰 Hong Kong's insurance regulator proposes a 100% risk charge for direct crypto holdings by insurers. A public consultation is planned from February to April, per Bloomberg. pic.twitter.com/vuc0xgY5nC — CoinMarketCap (@CoinMarketCap) December 22, 2025

The Insurance Authority believes these regulatory changes will positively impact the insurance sector and bolster the broader economy. A public consultation period is set for February to April before the proposed legislation is officially filed.

Hong Kong's Distinct Approach Compared to Other Asian Financial Hubs

Hong Kong’s stance is notably different from that of other major Asian financial centers. For instance, Singapore prohibits the use of credit cards for cryptocurrency purchases and requires retail investors to complete risk awareness assessments. South Korea maintains restrictions on insurers holding cryptocurrencies directly, even as it gradually lifts a 2017 ban on institutional crypto investments. Meanwhile, current Japanese insurance regulations do not classify cryptocurrencies as investment assets, but a potential reevaluation in 2026 could pave the way for new institutional products.

Earlier in 2024, Hong Kong approved spot Bitcoin and Ethereum exchange-traded funds. In November, the Securities and Futures Commission issued guidelines aimed at enhancing liquidity on licensed exchanges by giving platforms access to global order books.

As industry experts predict, large insurers with robust capital reserves may be the first to adopt the new framework, while smaller firms might be hesitant to join until there are standardized custodial and accounting practices. Operational challenges related to asset custody and cybersecurity are critical considerations for market players.

Early in 2024, the regulator began reviewing its risk-based capital framework. Some insurance companies are advocating for an expansion of the allowable asset classes beyond what is currently permitted. Market participants are closely following the consultation process for any potential revisions to the proposed risk charges.