The Hong Kong securities industry is pushing back against a plan that would tighten the net around crypto exposure inside traditional portfolios, arguing the city risks scaring off mainstream asset managers just as it tries to build a deeper digital-asset market.
In a submission dated Tuesday, the Hong Kong Securities and Futures Professionals Association urged regulators to keep a long-standing “de minimis” carve-out for Type 9 licensed asset managers, warning that scrapping it would turn even tiny allocations into a full licensing trigger.
Type 9 is Hong Kong’s standard licence for discretionary portfolio managers, the permission most traditional fund managers hold to run client money under the SFC’s rules.
Under today’s uplifted regime, Type 9 managers can invest less than 10% of a fund’s gross asset value in virtual assets without seeking a separate virtual asset management licence, as long as they notify the Securities and Futures Commission. The proposal under consultation would remove that threshold.
The industry group said the change effectively forces an “all-or-nothing” decision for firms that want to test crypto as a diversifier.
“This ‘all-or-nothing’ approach is disproportionate,” it wrote, adding that it would impose major compliance costs even when risk exposure stays limited.
It also urged regulators to bring the carve-out back in a clear, risk-based form. “We strongly propose reinstating a de minimis exemption,” the association said, arguing that managers below a set threshold should face a notification requirement rather than the full virtual asset management regime.
The submission lands amid Hong Kong’s broader effort to widen its digital-asset rulebook. The Financial Services and the Treasury Bureau and the SFC published consultation conclusions in December on licensing for virtual asset dealing services, and they opened a further public consultation on proposed licensing regimes for virtual asset advisory and management service providers.
Custody rules have become another pressure point. The association criticized proposals that would require virtual asset managers to use only SFC-licensed custodians, saying the mandate could prove unworkable for private equity and venture funds that buy early-stage tokens that local custodians do not yet support.
Hong Kong’s regulators have pitched the new licensing architecture as part of a push to bring more activity onshore, while tightening standards as institutional participation grows. Officials have also signalled they want a framework that can plug into existing regulated activity, rather than leaving crypto exposure to ad hoc interpretations.