Hong Kong’s push to expand its crypto regulatory framework risks backfiring if authorities move too quickly, according to the Hong Kong Securities & Futures Professionals Association.
The industry body has warned that, without transitional arrangements, compliant crypto managers could be forced to temporarily shut down operations despite actively seeking licenses under the proposed rules.
Key takeaways
Industry representatives warn of a potential “hard start” for new crypto licensing rules.
Existing firms could be forced to halt operations while license applications are reviewed.
The group is calling for a 6 to 12-month transition period to avoid disruption.
Regulators are still in the consultation phase, with no fixed start date yet.
The association’s concern centers on the possibility that regulators adopt a strict commencement model, under which firms would need to be fully licensed on day one or immediately cease regulated activities. Given the complexity of licensing applications and the likelihood of review backlogs, the group argues this could penalize compliant businesses rather than improve market integrity.
The warning comes as the Securities and Futures Commission and the Financial Services and the Treasury Bureau consult on new licensing regimes covering virtual asset dealing, advisory, and management services. These proposals would significantly expand Hong Kong’s regulatory perimeter beyond its current framework for crypto trading platforms.
Industry calls for flexibility in rollout
In its formal submission to regulators, the association urged the introduction of a deeming or grace period for firms already operating in the market that submit applications before the new regime takes effect. Without such a buffer, it warned, legitimate managers could be compelled to suspend operations while awaiting approval, disrupting fund management activities and undermining business continuity.
Beyond the immediate licensing issue, the consultation also addresses broader changes to how crypto advisory and asset management services would be regulated. While the industry body expressed support for Hong Kong’s ambition to integrate digital assets into its financial system, it cautioned that rigid timelines and a lack of transitional measures could deter participation and slow institutional adoption.
Similar themes have emerged in parallel discussions around Hong Kong’s planned implementation of the OECD’s Crypto Asset Reporting Framework. In those submissions, the group again backed the policy direction but warned that overly rigid or poorly calibrated requirements could expose firms to unnecessary legal and operational risks.
Taken together, the feedback highlights a consistent message from industry participants: stronger oversight is welcome, but execution matters. Without adequate transition periods and flexibility, the association argues Hong Kong risks disrupting compliant firms at a critical moment—potentially undermining its broader goal of positioning itself as a leading, well-regulated digital asset hub.
