The Hong Kong Securities & Futures Professionals Association (HKSFPA) has issued a warning that the city’s proposed new crypto licensing regimes could unintentionally compel compliant crypto managers to cease their activities if regulators proceed without implementing transitional arrangements.
The warning is centered on what the group has described as a potential “hard start.” This scenario would require existing firms to be fully licensed by the commencement date of the new rules. If they are not, they would have to cease regulated activities while their applications are under review.
Hong Kong’s Securities and Futures Commission, in conjunction with the Financial Services and the Treasury Bureau, is currently engaged in a consultation process for new licensing regimes. These regimes are intended to cover virtual asset dealing, advisory, and management services, thereby expanding regulatory oversight beyond the city’s existing framework for crypto trading platforms.
While the HKSFPA supports the general direction of tighter supervision for the virtual asset sector, the group has cautioned that implementing the new rules without adequate transitional arrangements could lead to operational bottlenecks. Such a situation could also disrupt fund management activities and undermine business continuity for firms that are already operating within the market.
Industry Group Recommends a Six to 12-Month Deeming Period
In a formal submission to the regulators as part of the consultation, the industry group has urged the authorities to introduce a deeming or grace period. This period would be applicable to existing practitioners who submit their license applications before the new regime officially commences.
The group has articulated that the absence of transitional arrangements poses a significant risk. It could compel legitimate managers to halt their operations while they await the approval of their applications. This concern is amplified by the inherent complexity of the application process and the potential for regulatory backlogs to cause delays.
“Legitimate businesses may be forced to suspend operations while awaiting approval,” the HKSFPA stated in its submission. “We strongly urge the government to implement a 6 to 12-month deeming period for existing practitioners who submit their applications prior to the commencement date.”
The new virtual asset regimes are currently in the consultation phase and a definitive commencement date has not yet been established.
Industry Body Warns That Rigid Timelines Could Hinder Adoption
Beyond the immediate concern of the “hard start” issue, the ongoing consultation also addresses wider changes to Hong Kong's crypto regulatory perimeter. These changes include the introduction of new requirements specifically for advisory and management services related to virtual assets.
In its official submission, the HKSFPA reiterated its support for Hong Kong's endeavors to integrate digital assets more fully into the established financial system.
However, the association cautioned that the lack of transitional arrangements and the imposition of rigid implementation timelines could act as deterrents. This could discourage compliant firms from participating in the market and ultimately hinder broader institutional adoption of virtual assets.
Earlier on Monday, the same industry group had expressed its backing for the direction of Hong Kong’s planned implementation of the OECD’s Crypto Asset Reporting Framework (CARF). At that time, the group also raised concerns that poorly calibrated requirements could expose firms to significant liability and operational risks.
Collectively, these submissions highlight a consistent theme in the industry's feedback to regulators. This theme involves a general support for stronger oversight in principle, coupled with a strong emphasis on the need for flexibility in execution to prevent unnecessary disruption to the market.