Hong Kong to License Crypto Dealers and Custodians by 2026, Boosting Market Trust

Hong Kong is moving forward with plans to introduce comprehensive regulatory frameworks for virtual asset dealers and custodians in 2026. The Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) announced their decision following a public consultation that received over 190 responses. The proposed legislation will establish a licensing system under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (according to reports).

The new rules aim to mirror the existing standards for securities dealing and will extend oversight to custodians responsible for securing private keys and protecting client assets. This step is part of Hong Kong's broader strategy to position itself as a leading digital asset hub in Asia. The SFC also launched a consultation on virtual asset advisory and management services, with input due by January 23, 2026 (as per the SFC announcement).

Regulators emphasized that the licensing regimes for dealers and custodians are designed to ensure market stability and investor protection. The proposed measures are seen as a continuation of Hong Kong's efforts to create a robust legal and regulatory environment for digital assets. These developments follow the introduction of the Stablecoin Ordinance in 2025, which established a licensing regime for stablecoin issuers (based on the ordinance).

Regulatory Expansion and Market Positioning

Hong Kong's push to regulate virtual asset dealers and custodians is part of a broader effort to establish a comprehensive legal framework for digital assets.

The SFC has already implemented licensing requirements for crypto trading platforms, and now it plans to expand oversight to include dealers and custodians. This move reflects the city's ambition to maintain its status as a trusted and competitive financial hub (according to regulatory analysis).

The proposed licensing regime for custodians will focus on safeguarding client assets, particularly private keys. This is intended to reduce the risk of loss, theft, or misuse. For dealers, the rules will align with those for traditional securities intermediaries, ensuring a consistent regulatory approach. The SFC's ASPIRe roadmap underscores this alignment and emphasizes improving access to regulated virtual asset markets (as the roadmap indicates).

Hong Kong's regulatory approach contrasts with China's intensified crackdown on virtual currencies. While mainland China continues to restrict crypto activities, Hong Kong is taking a more open stance. This strategy is aimed at attracting international investors and fostering innovation in the digital asset space. The city's business-friendly tax environment and established financial infrastructure further support this vision (according to market analysis).

Investor Protection and Market Clarity

The new licensing frameworks are expected to enhance investor protection and market integrity. By bringing dealers and custodians under a formal regulatory structure, Hong Kong aims to reduce the risks associated with unregulated crypto activities. The SFC has previously highlighted the importance of a transparent and secure environment for digital asset transactions (as part of their strategy).

Industry feedback has generally supported the proposed regulations, though some stakeholders have requested clearer definitions and streamlined processes. Regulators have taken this input into account as they finalize the legislative proposals. The goal is to create a balanced framework that supports innovation while managing risks effectively (as industry stakeholders note).

A key component of the initiative is the upcoming consultation on virtual asset advisory and management services. This consultation seeks to define the regulatory scope for these services and align them with traditional securities market standards. By doing so, Hong Kong aims to ensure that all participants in the digital asset ecosystem operate under clear and consistent rules (as planned).

Legislative Path and Global Ambitions

The government plans to submit the finalized legislative proposals to the Legislative Council in 2026. This timeline reflects the urgency of establishing a robust regulatory framework before the anticipated growth in virtual asset activities. The SFC and FSTB have emphasized the importance of a timely implementation to support market development (as regulators state).

Hong Kong's regulatory approach is also aligned with global trends in crypto oversight. As other jurisdictions develop their own frameworks, Hong Kong aims to maintain its position as a leader in responsible innovation. The city's efforts include testing tokenization initiatives and expanding access to global liquidity pools (according to industry reports).

Industry stakeholders and lawmakers, including Johnny Ng, have publicly endorsed the new regulatory direction. Ng highlighted the benefits of clearer compliance requirements and enhanced fraud prevention. His support underscores the political commitment to a structured and transparent digital asset market (as reported by industry sources).

Conclusion

The proposed regulations for virtual asset dealers and custodians represent a significant step in Hong Kong's strategy to become a global crypto hub. By introducing a licensing regime that mirrors traditional securities standards, the city aims to attract investment while ensuring market stability. The SFC's broader ASPIRe roadmap and ongoing consultations indicate a commitment to continuous improvement in the regulatory environment (as the roadmap shows).

As the legislation moves through the approval process, market participants will be watching closely to see how the rules balance innovation with investor protection. The final outcome could shape the future of digital asset markets in Asia and beyond.