Hong Kong Unlocks Global Crypto Liquidity to Challenge Singapore's Lead

Hong Kong has relaxed its cryptocurrency regulations to enhance market liquidity and attract global players, positioning itself as a competitive digital-asset hub in Asia. The Securities and Futures Commission (SFC) announced on November 3 that licensed virtual-asset trading platforms (VATPs) can now access liquidity from overseas affiliates, a move designed to improve pricing efficiency and reduce volatility for local investors. The reforms also include exemptions for new platforms offering crypto trading, stablecoins, and tokenized assets to professional investors, easing prior requirements for a 12-month operational track record, according to a Coinotag report.

The updated framework allows Hong Kong-based exchanges to connect with global order books, marking a departure from the previous "ringfenced" model that limited trades to domestic pools, as detailed in an Analytics Insight report. This change aligns the city's crypto market with traditional financial products and aims to bridge liquidity gaps that have historically constrained trading activity. SFC Chief Executive Officer Julia Leung emphasized the balance between fostering innovation and maintaining investor protections, stating, "Hong Kong investors stand to benefit from enhanced market liquidity and more competitive pricing, underpinned by robust safeguards to mitigate additional risks," as Coinotag reported.

Regulatory adjustments extend beyond trading. The SFC is finalizing licensing regimes for crypto dealers, custodians, and stablecoin issuers, with the Hong Kong Monetary Authority (HKMA) set to issue the first stablecoin licenses in 2026, according to a CoinEdition report. These measures aim to attract major players like Binance and Coinbase, which could operate in Hong Kong through broker licenses rather than full exchange approvals, CoinEdition noted. Additionally, licensed exchanges can now list new tokens and HKMA-approved stablecoins for professional investors without adhering to the prior 12-month track record requirement, as reported in a CoinSpeaker article.

The reforms are part of Hong Kong's broader strategy to rival Singapore and the United States as a crypto hub. By integrating global liquidity pools and streamlining licensing, the city seeks to address limitations in its current ecosystem, where only 11 exchanges and 49 brokers operate under SFC oversight, Coinotag reported. Gu Ronghui, a technology adviser to Singapore's Monetary Authority and former member of Hong Kong's Web3 task force, noted that Hong Kong has already pulled ahead of Singapore in attracting firms using crypto for treasury management, citing its proactive regulatory approach and access to mainland China's tech talent, according to a Yahoo Finance article.

For investors, the changes promise narrower bid-ask spreads and improved price discovery, particularly for high-volume assets like Bitcoin and Ethereum, Coinotag observed. Simulations from similar jurisdictions suggest trading spreads could decrease by up to 20%, Coinotag added. Institutional adoption is also expected to rise, with custody providers now able to apply for tailored licenses to manage digital assets, Analytics Insight reported. Experts predict this could double the number of licensed entities within 18 months, according to industry observers at Deloitte, Coinotag noted.

However, challenges remain. The SFC has yet to clarify implementation timelines, leaving licensed platforms in a regulatory gray area regarding retail investor access, as reported by Yahoo Finance in its coverage of the policy rollout. Additionally, while the SFC has eased entry barriers, strict anti-money laundering (AML) and know-your-customer (KYC) requirements persist, and the regulator tightened crypto custody rules in August, mandating enhanced safeguards for client assets, Yahoo Finance reported.

Hong Kong's moves come amid a global race to dominate the digital-asset landscape. Singapore, which has long led in crypto adoption, maintains a 20% edge in institutional inflows, Coinotag observed. Yet, Hong Kong's strategic advantages—including its status as a gateway to mainland China and a focus on real-world asset tokenization—could close this gap, according to Yahoo Finance.

As the SFC continues refining its framework, stakeholders will monitor how these reforms impact market depth and competition. For now, the city's regulatory agility signals its ambition to become a cornerstone of Asia's crypto ecosystem.