Hong Kong Moves to License Crypto Dealers and Custodians as Regulatory Net Widens Across Digital Assets

Expanded rules close OTC and custody gaps while positioning the city for tighter oversight in 2026

TL;DR

• Hong Kong finalized consultations in late December 2025 to license crypto dealers and custodians, extending oversight beyond exchanges to OTC trading and asset safekeeping.
• Regulators framed the move as a balance between market development, investor protection, and risk control, with legislation expected in 2026.
• The expansion aligns digital assets more closely with traditional finance standards as market activity tracks broader shifts in crypto price and coin market cap dynamics.

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Hong Kong has taken another decisive step toward tightening its digital asset framework, moving to formally regulate crypto dealers and custodians after concluding public consultations in late December 2025. Reporting from multiple outlets shows the Financial Services and the Treasury Bureau and the Securities and Futures Commission are preparing new licensing regimes designed to bring previously under-regulated segments—such as over-the-counter trading desks and custody providers—into the city’s supervisory perimeter. The consultations closed around December 24, with legislative proposals expected to reach the Legislative Council in 2026, marking a new phase in Hong Kong’s multi-year effort to build a comprehensive rulebook for digital assets.

The proposed framework extends oversight well beyond virtual asset trading platforms, which were already brought under mandatory licensing earlier in 2025. Under the new rules, firms providing virtual asset dealing services, including brokerage-style operations and OTC desks handling large or bespoke transactions, would need formal approval from regulators. Custodians controlling client assets or private keys would also face licensing requirements focused on safekeeping standards, internal controls, and risk management. Regulators have signaled that dealers may be required to hold client assets only with licensed custodians, reinforcing a closed-loop compliance structure similar to traditional securities markets. Capital thresholds discussed in related regulatory coverage point to higher entry barriers, underscoring the intent to filter out lightly capitalized operators.

Officials have consistently framed the expansion as a way to close regulatory blind spots rather than slow innovation. Securities and Futures Commission chief executive Julia Leung described the progress as ensuring Hong Kong remains “at the global forefront of digital asset market developments” while fostering a trusted and sustainable ecosystem. Financial Services and the Treasury Secretary Christopher Hui emphasized that the licensing regimes aim to strike a “prudent balance” between market growth, risk management, and investor protection. Lawmakers echoed that view, with Legislative Council member Wu Jietzhuang noting that formalizing OTC trading and custody services would help combat fraudulent activity disguised as crypto operations and reduce potential losses for the public.

The timing of the regulatory push coincides with heightened attention on market transparency as investors track shifts in crypto price, volatility, and the broader coin market cap. While price action and the crypto price index fluctuate with global macro conditions, Hong Kong’s authorities appear focused on insulating local market infrastructure from systemic risks. The dealer and custodian rules also sit alongside other initiatives, including a stablecoin licensing ordinance that took effect earlier in 2025 and separate consultations on regulating virtual asset advisory and asset management services. Together, these measures reflect a “same business, same risk, same rules” philosophy intended to align digital asset activities with long-standing financial standards.

Hong Kong’s approach contrasts with lighter-touch regimes elsewhere in the region and is designed to reinforce the city’s status as a regulated financial hub rather than a permissive crypto haven. By extending licensing to the full value chain—from execution and brokerage to custody and advisory services—regulators are signaling that digital assets will be treated as an integral part of the financial system. The coming year will determine how quickly firms adapt to the new requirements and whether the tighter framework reshapes participation as global investors continue to weigh regulatory certainty alongside market performance indicators such as crypto price movements and aggregate capitalization trends.

This article has been refined and enhanced by ChatGPT.