Objection to Hong Kong's asset management regulation proposal; HKSFPA expresses concerns

The Hong Kong Securities and Futures Professionals Association (HKSFPA) has submitted an official feedback pointing out multiple regulatory challenges to the new digital asset management framework proposed by the authorities. In particular, they express concern that the “all or nothing” regulatory design, which raises entry barriers for the industry, could hinder the development of the asset management sector.

Current Rule Repeal Is Unreasonable, Undermining Flexibility for Asset Management Firms

Currently, institutions holding a Type 9 license (Asset Management) are permitted to allocate up to 10% of their total fund assets to cryptocurrencies, subject to reporting to the regulatory authorities. However, the proposed framework would completely eliminate this cap, and even a 1% allocation to Bitcoin would require obtaining a virtual asset management license.

HKSFPA criticizes this approach as “lacking balance.” Despite limited risk exposure, it could impose excessive compliance costs on traditional asset management firms. The association points out that such strict requirements would make it practically impossible for emerging crypto asset sectors to enter the market.

Custody Requirements Impede Early-Stage Investments; Calls for International Cooperation

An even more serious issue is that the proposed framework mandates virtual asset managers to use only custodians licensed by the Securities and Futures Commission (SFC) for custody of assets. HKSFPA argues that this requirement is inappropriate for Web3 venture capital and early-stage token investments.

If local institutions are restricted from participating under this requirement, it could negatively impact the development of Hong Kong’s digital asset ecosystem. The industry advocates for allowing self-custody for professional investor services and utilizing internationally reputable custodians.

Industry Recommendations: Balancing Regulation and Growth

HKSFPA proposes supporting the allowance of self-custody systems for professional investors and the use of qualified overseas custodians. This is expected to create an environment where the asset management sector can engage in the crypto space without excessive regulatory burdens.

Hong Kong Authorities Promote Review of Digital Asset Regulation Framework

According to reports, Hong Kong’s financial authorities are conducting new consultations on a comprehensive licensing system for digital asset trading, advisory, and asset management services, taking into account industry feedback. Discussions between the authorities and industry stakeholders are ongoing, with adjustments being made toward the finalization of regulatory proposals.