Hong Kong's new regulations on crypto asset management are facing resistance from the industry, with the association warning that the "all or nothing" licensing requirements may stifle innovation.

On January 20, Hong Kong securities industry groups raised objections to the city's proposed regulatory framework for digital asset management, warning that the reforms could hinder traditional asset management institutions from venturing into the cryptocurrency sector. The Hong Kong Securities and Futures Professionals Association (HKSFA) submitted a comment to regulators on Tuesday opposing a proposed regulatory adjustment that would eliminate the existing "minimum exemption threshold" for Type 9 licensed asset managers. According to a report by local law firm JunHe, under the current framework, institutions holding a Type 9 license (covering discretionary portfolio management and asset management) only need to report to regulators if they allocate less than 10% of their total fund assets to crypto assets, without needing to apply for an additional license upgrade. The HKSFA pointed out that the proposed reforms would eliminate this threshold, meaning that even a 1% exposure to Bitcoin would require a full virtual asset management license. The industry group stated that this "all or nothing" regulatory approach lacks proportionality and argues that it would still incur significant compliance costs even with limited risk exposure, potentially hindering traditional management institutions from exploring crypto asset classes. This industry backlash targets the already accelerated regulatory framework. In December last year, Hong Kong authorities released a consultation summary report on relevant reform proposals following the launch of public consultation in June. The Financial Services and the Treasury Bureau and the Securities and Futures Commission have launched further consultations on introducing a supplementary licensing regime for cryptocurrency trading, advisory, and management services.