The Hong Kong Securities & Futures Professionals Association (HKSFPA) has cautioned that the city’s planned rollout of new crypto licensing regimes could unintentionally force otherwise compliant crypto managers to halt operations if regulators move ahead without transitional measures.
The concern stems from what the group described as a possible “hard start” approach, where firms already operating in the market would need to be fully licensed by the time the new rules take effect or suspend regulated activities while their applications are being assessed.
Hong Kong’s Securities and Futures Commission, together with the Financial Services and the Treasury Bureau, is currently consulting on expanded licensing requirements for virtual asset dealing, advisory and management services. The proposals would significantly broaden regulatory oversight beyond the existing framework that primarily governs crypto trading platforms.
While backing the overall push for stronger supervision, the association warned that a lack of transitional arrangements could lead to operational bottlenecks, disrupt fund management activities and threaten business continuity for firms already active in the sector.
Industry group calls for six to 12-month deeming period
In its consultation submission, the industry group recommended introducing a deeming or grace period of six to 12 months for existing market participants that file license applications before the new regulatory regime takes effect.
It warned that without transitional arrangements, legitimate crypto managers could be forced to suspend operations while waiting for approvals, particularly given the complexity of the licensing process and the risk of application backlogs.
“Legitimate businesses may be forced to suspend operations while awaiting approval,” the HKSFPA said, urging authorities to adopt a six to 12-month deeming period for practitioners who apply ahead of the commencement date.
The proposed virtual asset licensing regimes remain under consultation and do not yet have a fixed start date.
Industry body cautions rigid timelines could slow adoption
Beyond concerns over a potential hard start, the consultation also addressed broader changes to Hong Kong’s crypto regulatory perimeter, including new requirements for advisory and asset management services.
While reaffirming its support for Hong Kong’s push to integrate digital assets into the financial system, the association warned that inflexible implementation timelines and a lack of transitional measures could discourage compliant firms from participating and slow institutional adoption.
Earlier this week, the same group also expressed support for Hong Kong’s planned adoption of the OECD’s Crypto Asset Reporting Framework (CARF), while cautioning that poorly calibrated rules could expose firms to heightened operational and legal risks.
Taken together, the submissions reflect a consistent stance from the industry body: backing stronger regulatory oversight in principle, while calling for greater flexibility in execution to minimize market disruption.
