Industry Pushback: Stricter Crypto Rules Could Shut Out Traditional Asset Managers

The Hong Kong Securities and Futures Professionals Association (HKSFPA) has formally objected to proposed changes in digital asset regulation, warning that eliminating the current de minimis exemption for Type 9 licensed firms could deter traditional financial firms from engaging with crypto assets. In a recent submission, the group emphasized the need for balanced oversight that supports innovation without imposing disproportionate burdens.

Current Framework Allows Limited Exposure Without Extra Licensing

Under existing rules, asset managers holding a Type 9 license—covering discretionary portfolio management—can allocate up to 10% of fund assets to digital assets without needing an additional virtual asset license, provided they notify regulators. This flexibility has enabled many traditional firms to cautiously explore blockchain-based investments while maintaining compliance.

Proposed Shift to 'All-or-Nothing' Approach Raises Concerns

The HKSFPA criticized plans to remove this threshold, which would require full virtual asset licensing even for minimal exposure, such as a 1% allocation to Bitcoin. The association described the move as disproportionate, noting that the compliance costs would outweigh the actual risk, especially for passive or diversification-driven strategies.

  • Minor allocations should not equate to full-scale crypto fund management
  • Heavy-handed regulation may stifle market experimentation
  • Barriers could push traditional firms to avoid crypto entirely

A Call for Proportional Regulation and Gradual Integration

Rather than a rigid 'comply or avoid' model, HKSFPA advocates for a tiered regulatory approach based on exposure level and investment intent. The group believes that allowing measured participation will strengthen Hong Kong’s position as a global financial hub, fostering responsible innovation while managing systemic risk. As consultations continue, industry stakeholders hope regulators will prioritize practicality over precaution.