Hong Kong group warns SFC’s ‘hard start’ could throw cryptocurrency companies into chaos

Hong Kong’s regulatory push to more strictly manage digital assets is underway, but industry observers warn a hasty rollout could be disruptive to compliant companies. The Hong Kong Securities and Futures Professionals Association (HKSFPA) has warned regulators of a “hard start” where existing operators would have to obtain a full license from day one or suspend regulated activities while their applications are reviewed. With the Securities and Futures Commission, the Financial Services Commission and the Treasury Board seeking input on a licensing regime covering virtual asset trading, advisory services and management, observers say transitional measures are essential to strengthen oversight while maintaining business continuity.

• The licensing regime will expand regulatory oversight beyond trading venues to include advisory and management services in addition to trading.
• The HKSFPA warns that a hard start without transitional measures could disrupt fund management and hinder legitimate operators.
• The association called for an estimate period of six to 12 months for existing practitioners submitting applications before the start date.
• The launch date is yet to be determined and the scheme is still in the consultation phase.

emotion: neutral

Market situation: The debate in Hong Kong sits within a broader global trend to strengthen digital asset regulation and ensure compliance with international reporting standards, as regulators consider how to balance investor protection and market innovation.

The industry recommends an estimate period of 6 to 12 months.

In its consultation submission, the association urged the regulator to implement a presumption period or grace period for existing practitioners who have already submitted a license application before the scheme start date. It warned that without transitional arrangements, the legitimate administrator may have to suspend operations while applications are processed, given the complexity of the review process and the potential for backlogs. “Legal businesses may be required to close operations while awaiting approval,” the group wrote. “We strongly urge the government to implement a presumption period of six to 12 months for existing practitioners who submit applications before the start date.”

The content of the proposal consists of the fact that the new virtual asset regime is still in the consultation phase, with no confirmed launch date yet announced. Supporters say the grace period will help maintain continuity for asset managers while ensuring they meet regulatory standards rather than forcing a halt during the transition period.

Industry groups warn that strict timelines could hinder adoption.

In addition to difficult startup questions, the consultation covers extensive changes to cryptocurrency regulatory boundaries, including new requirements for advisory and management services. The association supports Hong Kong’s important goal of integrating digital assets into the financial system, but warns that lack of transitional measures and an overly stringent implementation schedule could hinder the participation of compliant companies and hinder institutional adoption.

The same industry group previously expressed cautious support for the direction of Hong Kong’s planned implementation of the OECD Crypto Asset Reporting Framework (CARF). It also warned that if requirements are not properly coordinated, companies could be exposed to liability and operational risk. Collectively, the submissions highlight recurring themes in industry feedback. That is, one that favors stronger oversight in principle, combining implementation flexibility to avoid disruption and foster a stable path to broader adoption.