FSTB and SFC launch consultation on legislative proposals for regulating digital asset dealing and custodian services
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To promote the sustainable development of Hong Kong's DA ecosystem while protecting investors and managing risks, the Government and financial regulators have been closely monitoring market developments and maintaining dialogue with industry stakeholders to continuously review and enhance Hong Kong's regulatory framework for DA activities.
In this regard, the FSTB conducted a public consultation between February and April last year on the legislative proposals for establishing a licensing regime for DA over-the-counter service providers. Based on the feedback received, the FSTB, in collaboration with the SFC, has revised the legislative proposals. By launching the public consultation today, the FSTB and the SFC seek to gather views from stakeholders on the framework and key elements of the revised legislative proposals.
The revised legislative proposals cover the licensing regime for DA dealing service providers and the licensing regime for DA custodian service providers. Under the two proposed licensing regimes, the SFC will be the standard setter, responsible for formulating regulatory requirements applicable to licensed and registered DA dealing and custodian service providers. Meanwhile, the Hong Kong Monetary Authority (HKMA) will be the frontline regulator for banks and stored value facilities (SVFs) registered to provide the relevant services. Both the SFC and the HKMA will be provided with the powers to implement the regimes in accordance with the statutory requirements.
The key elements of the proposed licensing regimes are as follows:
(1) Licensing Regime for DA Dealing Service Providers
* Any person who carries on a business of providing DA dealing services in Hong Kong will have to be licensed by or registered with the SFC;
* Irrespective of whether the relevant DA dealing services are provided through a physical outlet and/or other platforms, both simple dealing services (e.g. smaller-scale conversions between different DAs or between DAs and fiat money) and more complex services (e.g. brokerage activities, block trading activities, and other activities of advisors or asset managers) will fall under the scope of the licensing regime;
* Licensed or registered providers of DA dealing services will need to meet fit-and-proper criteria and comply with a range of regulatory requirements, including those related to financial resources, knowledge and experience, risk management, financial reporting and disclosure, conduct of business, information and notifications, record keeping, proper protection of client assets, and investor protection safeguards; and
* The licensing regime will be fully implemented on the date the relevant statutory provisions come into effect, with no deeming arrangement.
(2) Licensing Regime for DA Custodian Service Providers
* Any person carrying on a business in Hong Kong of providing DA custodian services will have to be licensed by or registered with the SFC. The provision of DA custodian services as a business will be defined as - by way of business, the safekeeping of (i) DAs on behalf of clients; or (ii) instruments enabling transfer of DAs of clients (including but not limited to private keys) on behalf of clients; and
* Same as DA dealing services, licensed or registered providers of DA custodian services will need to meet fit-and-proper criteria and comply with a range of regulatory requirements, including those related to proper protection of client assets, financial resources, knowledge and experience, risk management, financial reporting and disclosure, conduct of business, information and notifications, and record keeping. Similarly, the licensing regime will be fully implemented on the date the relevant statutory provisions come into effect, with no deeming arrangement.
The consultation papers are available on the webpages of the FSTB and the SFC:
* Licensing Regime for DA Dealing Service Providers (www.fstb.gov.hk/fsb/en/publication/consult/doc/VADEALING_consultation_paper_en.pdf / apps.sfc.hk/edistributionWeb/gateway/EN/consultation/doc?refNo=25CP6)
* Licensing Regime for DA Custodian Service Providers (www.fstb.gov.hk/fsb/en/publication/consult/doc/VACUSTODY_consultation_paper_en.pdf / apps.sfc.hk/edistributionWeb/gateway/EN/consultation/doc?refNo=25CP7)
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "We have the public consultation on the establishment of licensing regimes for DA dealing and custodian service providers launched today, right after our release of the Policy Statement 2.0 on the Development of Digital Assets in Hong Kong yesterday. By this, we want to deliver an important message to the public that while we are striving to build Hong Kong into a premier global hub for DAs, upholding investor protection is still our utmost concern. The proposed licensing regimes will lay a solid foundation for us to establish a comprehensive regulatory framework for DAs with investor and customer protection at its core. The move will also help realise our vision to build Hong Kong's DA ecosystem into a highly trusted one that will flourish sustainably and responsibly in a risk-managed manner, thereby delivering concrete benefits to the real economy and financial markets."
The Chief Executive Officer of the SFC, Ms Julia Leung, said, "The proposed introduction of the regulatory regimes for dealers and custodians would complete a digital asset ecosystem that is both safe and vibrant for institutional and retail investors. In balancing industry growth with robust investor protection, we join hands with the Hong Kong SAR Government to build Hong Kong into a trusted and sustainable platform that taps into global liquidity. We will also stay committed to close collaboration with our industry stakeholders to broaden participation and further raise the vibrancy of Hong Kong's ecosystem."
The FSTB and the SFC welcome views from the public and stakeholders on the proposed licensing regimes. Submissions should be sent by post (24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong) or by email to the FSTB on or before August 29, 2025:
* Licensing Regime for DA Trading Service Providers: vadealing-consult@fstb.gov.hk
* Licensing Regime for DA Custodian Service Providers: vacustody-consult@fstb.gov.hk
During the consultation period, the FSTB and the SFC will also meet with relevant sectors to gather feedback.
Note: The term "digital asset" includes "virtual asset". As "virtual asset" is a legally defined term under the existing Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), the term "virtual asset" is still adopted in the consultation papers in this public consultation. The Government will review whether another term should be used in the legislation in lieu of "virtual asset" so as to better reflect the nature of this asset class, and align with the understanding across international markets.
Ends/Friday, June 27, 2025
Issued at HKT 17:30
Issued at HKT 17:30
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