The Hong Kong Securities & Futures Professionals Association (HKSFPA) has raised concerns regarding the city’s upcoming crypto licensing framework. The association warned that if the new regulations are enforced rigidly, it may inadvertently force compliant crypto managers to halt their operations due to a lack of transitional provisions.
The HKSFPA cautioned about a possible “hard start” scenario where existing firms must be fully licensed by the time new regulations come into effect, or they would need to suspend regulated activities while their applications are being processed.
Currently, the Hong Kong Securities and Futures Commission and the Financial Services and the Treasury Bureau are seeking public opinion on new licensing regulations covering virtual asset transactions, advisory, and management services. These measures aim to broaden regulatory supervision beyond the existing framework that governs crypto trading platforms.
While the association commends the intention of enhancing oversight, it warns that implementing these regulations without transitional strategies could lead to operational disruptions, bottlenecks in fund management, and threaten operational stability for companies already in the field.
Recommendations for a Grace Period
The industry group recommended that a grace period of six to twelve months be established for existing practitioners applying for licenses ahead of the new rules’ effective date. They expressed concern that the absence of such provisions could compel legitimate management firms to stop their operations while awaiting approvals, especially given the complicated application process and the likelihood of delays.
“Legitimate businesses may be forced to suspend operations while awaiting approval,” stated the HKSFPA. “We urgently request the government to consider implementing a six to twelve-month deeming period for existing practitioners who submit applications early.”
The new virtual asset regulations are still in the consultation stage, and an official start date has not been set yet.
Broader Implications on Adoption
Aside from the hard start concern, the consultation also touched on upcoming changes to regulatory requirements, including new stipulations for advisory and management services. While the association supports efforts to incorporate digital assets within the financial system, it cautioned that the absence of transitional measures could deter compliant firms and impede broader institutional adoption.
On a related note, this same industry group endorsed Hong Kong’s planned implementation of the OECD’s Crypto Asset Reporting Framework (CARF), although it acknowledged that poorly designed requirements could expose businesses to significant risks and liabilities.
In conclusion, these insights reflect a consistent theme in industry feedback: strong support for enhanced oversight in principle, alongside requests for more flexible execution to minimize disruption.
