- Compliant crypto managers in Hong Kong risk operational halts under a “hard start” licensing scenario.
- HKSFPA recommends a 6–12 month grace period for existing firms to ensure continuity.
- Flexible timelines are vital to maintain institutional adoption and sector confidence.
Hong Kong’s move to expand regulatory oversight of digital assets is facing caution from the city’s crypto industry. The Hong Kong Securities & Futures Professionals Association (HKSFPA) warned that proposed new licensing rules could unintentionally force compliant crypto managers to suspend operations if regulators fail to provide transitional arrangements.
Hard Start Could Stall Operations
The HKSFPA’s main concern is a potential “hard start,” under which existing firms must secure full licenses by the commencement date of the new rules. Without a grace period, companies may need to halt regulated activities while applications are under review, creating operational bottlenecks and disrupting fund management.
In its consultation response, the association urged regulators to introduce a deeming period of six to 12 months for firms submitting applications before the rules take effect. The group stressed that the licensing process is complex and backlogs could leave legitimate managers unable to operate, posing risks to business continuity.
Industry Supports Oversight but Seeks Flexibility
While the HKSFPA supports tighter supervision and the integration of digital assets into Hong Kong’s financial system, it warned that rigid implementation timelines could discourage institutional participation. The association also highlighted concerns around the OECD’s Crypto Asset Reporting Framework (CARF), emphasizing that poorly calibrated rules could increase operational and legal risks for companies.
The consultation covers virtual asset dealing, advisory, and management services, expanding oversight beyond the city’s existing framework for crypto trading platforms. Industry feedback consistently supports stronger oversight in principle, but calls for flexibility in execution to avoid market disruption.
Transitional Arrangements Essential for Adoption
Without transitional measures, compliant managers may be forced to halt operations, which could undermine confidence in Hong Kong as a hub for digital asset investment. The industry group’s proposals aim to balance regulatory goals with business continuity, ensuring the city’s crypto sector remains attractive to both local and international investors.
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Hong Kong’s crypto licensing reforms are widely supported in principle, but the path to implementation will require careful calibration. Introducing transitional arrangements and flexibility in timing is critical to prevent disruptions for compliant managers and maintain the city’s position as a leading financial hub.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. CoinBrief.io is not responsible for any financial losses.
