Hong Kong Launches Consultation on Virtual Asset Trading Regulations

The Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) of China Hong Kong have jointly launched a public consultation on proposed legislative amendments aimed at regulating virtual asset trading service providers and custodians. This consultation, which began in February and will conclude on August 29, 2025, seeks to establish a comprehensive regulatory framework for the digital asset sector.

The proposed regime includes two key components: the licensing regime for digital asset dealing service providers and the licensing regime for digital asset custodian service providers. These amendments are part of China Hong Kong's broader "Virtual Assets 2.0" policy, which aims to unify regulations for various digital asset platforms, including custodians, stablecoin issuers, and over-the-counter (OTC) providers. The policy statement outlines the next steps in the regulatory process, emphasizing the importance of licensing regimes for both dealing and custodian service providers.

Under the new policy, the SFC will oversee the licensing of digital asset trading platforms and custodial service providers. This move is designed to enhance the regulatory oversight of the digital asset sector, ensuring that service providers adhere to stringent standards and guidelines. The consultation period allows stakeholders, including industry participants and the public, to provide feedback on the proposed amendments, ensuring that the final regulations are robust and effective.

The consultation is a critical step in China Hong Kong's efforts to cement its role as a leading global hub for digital assets. By establishing a clear and comprehensive regulatory framework, China Hong Kong aims to attract more digital asset businesses and foster innovation in the sector. The proposed regime is expected to provide greater clarity and certainty for service providers, enhancing investor confidence and promoting the growth of the digital asset industry.

The consultation process is part of a broader initiative to modernize China Hong Kong's financial regulatory landscape. The FSTB and SFC have been actively engaging with industry stakeholders to develop regulations that balance innovation with investor protection. The proposed amendments reflect a commitment to creating a regulatory environment that supports the development of digital assets while mitigating risks associated with this emerging sector.

In summary, the consultation on the proposed regime for regulating virtual asset trading service providers and custodians is a significant development in China Hong Kong's regulatory landscape. The proposed amendments aim to establish a comprehensive framework for the digital asset sector, enhancing regulatory oversight and promoting innovation. The consultation period provides an opportunity for stakeholders to contribute to the development of regulations that will shape the future of digital assets in China Hong Kong.