The Hong Kong Securities & Futures Professionals Association (HKSFPA) warned that the city’s proposed rollout of new crypto licensing regimes may unintentionally force compliant crypto managers to cease activities if regulators proceed without transitional arrangements.
The warning centers on what the group described as a potential “hard start,” under which existing firms would be required to be fully licensed by the commencement date of the new rules or cease regulated activities while their applications are under review.
Hong Kong’s Securities and Futures Commission and the Financial Services and the Treasury Bureau are currently consulting on new licensing regimes that cover virtual asset dealing, advisory and management services, which would expand regulatory oversight beyond the city’s existing framework for crypto trading platforms.
While supporting the overall direction of tighter supervision, the group warned that implementing the new rules without transitional arrangements could create operational bottlenecks, disrupt fund management activities and undermine business continuity for companies already operating in the market.
Industry group recommends a six to 12-month deeming period
In a consultation submission to the regulators, the industry group urged the introduction of a deeming or grace period for existing practitioners who submit license applications ahead of the regulatory commencement date.
The group stated that the absence of transitional arrangements poses a risk that legitimate managers may be compelled to halt their operations while awaiting approval, particularly given the complexity of the application process and the potential for backlogs.
“Legitimate businesses may be forced to suspend operations while awaiting approval,” the HKSFPA wrote. “We strongly urge the government to implement a 6 to 12-month deeming period for existing practitioners who submit their applications prior to the commencement date.”
The new virtual asset regimes are still at the consultation stage and do not have a fixed commencement date yet.
Related: China-led CBDC project mBridge tops $55B in cross-border payments
Industry body warns that rigid timelines could hinder adoption
Beyond the hard-start issue, the consultation also touched upon wider changes to the crypto regulatory perimeter, including new requirements for advisory and management services.
In its submission, the association said that it supports Hong Kong’s efforts to integrate digital assets into the financial system.
Still, it warned that the absence of transitional arrangements and rigid implementation timelines could deter compliant firms from participating and hinder institutional adoption.
On Monday, the same industry group backed the direction of Hong Kong’s planned implementation of the OECD’s Crypto Asset Reporting Framework (CARF) while warning that poorly calibrated requirements could expose companies to liability and operational risks.
Together, the submissions highlight a recurring theme in their industry feedback, which is the support for stronger oversight in principle, coupled with calls for flexibility in execution to avoid disruption.
Magazine: Chinese users turn to ’U cards’ to get around crypto rules: Asia Express
