Hong Kong Targets 2026 for New Crypto Dealer and Custodian Laws

Core Viewpoint - Hong Kong is advancing its strategy to establish a comprehensive regulatory framework for virtual assets by introducing new licensing regimes for virtual asset dealers and custodians [1][3]. Regulatory Developments - The proposed regulations will encompass over-the-counter (OTC) desks, brokers, and asset custodians under the same regulatory framework as licensed trading platforms, imposing standards akin to traditional securities firms on dealers and strict requirements for custodians regarding private key management and asset segregation [2]. - A new one-month consultation has been initiated to regulate virtual asset advisory and asset management services, with plans to introduce a legislative bill to the Legislative Council by 2026 [4]. Strategic Implications - This initiative is part of the Securities and Futures Commission's (SFC) "ASPIRe" roadmap, aimed at positioning Hong Kong as a global virtual asset hub [2]. - The establishment of licensing regimes signals to institutional investors that Hong Kong is creating a complete regulatory structure, addressing counterparty risks that have previously hindered significant capital investment [5]. Market Positioning - The regulatory move positions Hong Kong in direct competition with Singapore as Asia's primary digital asset center, contrasting with mainland China's restrictive crypto policies [4]. - The new regulations will facilitate the development of more complex financial products, such as structured derivatives and tokenized securities, by ensuring that all components of the value chain adhere to supervisory standards [6].