Hong Kong Promotes Responsible Crypto Framework at WEF

• Hong Kong promotes a risk-based digital asset regime while positioning itself as a regulated fintech hub.
• Proposed rule changes could end the 10% crypto exemption for asset managers, raising compliance demands.
• Industry groups warn that tighter licensing and custody rules may limit cautious crypto exposure by funds.

Hong Kong’s approach to regulating digital assets was in focus this week after the city’s finance chief outlined its strategy on the global stage, even as parts of the financial industry raised concerns about proposed rule changes at home.

Speaking at a closed-door workshop during the annual meeting of the World Economic Forum in Davos, Switzerland, Hong Kong Financial Secretary Paul Chan Mo-po described the city’s digital asset regime as designed to balance innovation with financial stability. Chan said finance and technology were increasingly interconnected and required oversight that supported development while addressing systemic risks.

According to Chan, digital assets can improve transparency, strengthen risk management processes, and enable more efficient capital flows. He reiterated Hong Kong’s regulatory principle of “same activity, same risk, same regulation,” framing it as a basis for what officials consider responsible and sustainable market development. Chan also said the government and regulators view themselves as market enablers, setting examples through policy and implementation.

Hong Kong has prioritized its role as a regional fintech hub in recent years. Chan noted that since 2023, the city has issued three batches of tokenised green bonds, totalling US$2.1 billion. He also pointed to the existing licensing regime for virtual asset trading platforms and a pilot programme launched last November by the Hong Kong Monetary Authority, which facilitates real-value transactions using tokenised deposits and digital assets.

Industry Pushback on Proposed Rule Changes

While officials promote regulatory clarity, industry groups have expressed reservations. The Hong Kong Securities and Futures Professionals Association submitted a filing this week warning that proposed changes could deter traditional asset managers from limited engagement with cryptocurrencies.

At issue is a proposal by the Securities and Futures Commission to remove the longstanding 10% “de minimis” exemption for Type 9 licensed asset managers. Under the current system, managers can allocate up to 10% of a fund’s assets to virtual assets without obtaining a separate licence, provided regulators are notified. The proposed framework would eliminate that limit, meaning any level of crypto exposure would require full licensing.

The association said the change would impose higher compliance costs on firms exploring small allocations rather than crypto-focused strategies. Regulators have also proposed tighter custody rules and the adoption of the OECD-aligned Crypto-Asset Reporting Framework, which would expand oversight to firms previously outside traditional securities regulation. Local law firm JunHe LLP has described the proposals as a material shift in regulatory expectations.

Related:Hong Kong Prepares to Share Crypto Asset Data with Tax Authorities Worldwide