Hong Kong to Mandate Licenses for Crypto Dealers, Custodians in 2026 Overhaul

Hong Kong is moving forward with new licensing requirements for virtual asset dealers and custodians, as part of its broader strategy to strengthen oversight in the crypto market. The Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) announced that consultations on the proposed licensing regimes have concluded, with the new rules expected to require firms to obtain licenses once the framework is in place. This is a significant development in Hong Kong's push to establish a more structured and regulated digital asset market.

The new licensing regimes are designed to ensure that firms providing crypto dealings or custody services meet rigorous regulatory standards. These rules build upon existing frameworks, including the opt-in licensing system introduced in 2020, which has so far approved 11 companies.

By expanding the regulatory scope, Hong Kong aims to foster trust among investors and ensure the long-term sustainability of its crypto market.

Regulators have emphasized that the proposed framework for virtual asset dealers will mirror existing rules for traditional securities dealing. This approach aligns with Hong Kong's broader financial market regulations and ensures consistency across sectors. For custodians, the focus will be on safeguarding private digital keys and minimizing risks of theft or mismanagement. These measures are expected to enhance the security of digital assets held by third-party service providers.

Why This Regulatory Expansion Matters

Hong Kong's move to mandate licensing for virtual asset dealers and custodians is part of a long-term vision to position the city as a leading crypto hub. The regulatory expansion comes amid growing global interest in digital assets and increasing calls for clearer oversight. By introducing mandatory licensing for trading and custody services, Hong Kong aims to create a more transparent and investor-friendly environment that can attract both local and international participants.

The shift from an opt-in model to a mandatory licensing framework reflects a broader trend in regulatory tightening. Earlier in 2025, Hong Kong introduced the Stablecoin Ordinance, which established a licensing regime for stablecoin issuers. This new measure for dealers and custodians further reinforces the city's commitment to comprehensive oversight and aligns with its ambition to serve as a bridge between mainland China and global capital markets.

What Comes Next for Hong Kong's Crypto Market

With the new licensing rules moving toward implementation, Hong Kong is also launching a public consultation on regulating virtual asset advisory and management services. This initiative is part of a broader effort to bring all major segments of the digital asset market under a unified regulatory framework. The consultation period will remain open until January 23, 2026, and regulators have invited stakeholders to provide feedback on the proposed measures.

Once finalized, the new licensing regimes are expected to be submitted to the Legislative Council in 2026 according to reports. In the meantime, firms are encouraged to engage with the SFC early to prepare for the upcoming changes. This proactive approach will help businesses adapt to the stricter compliance requirements and ensure they remain competitive in a more regulated market.

For investors, the expanded licensing regime is likely to offer greater confidence in the security and legitimacy of crypto services. By requiring dealers and custodians to meet high regulatory standards, Hong Kong is addressing key concerns around fraud, mismanagement, and operational risks. This, in turn, supports the city's goal of attracting institutional investors who require legal certainty before committing capital.

As Hong Kong continues to evolve its regulatory framework, the city is also exploring opportunities in tokenization and other innovative financial technologies. These efforts highlight a strategic vision to remain at the forefront of global financial developments and maintain its competitive edge as a financial hub. By balancing innovation with risk management, Hong Kong aims to create a sustainable and trusted ecosystem for digital assets.