Hong Kong’s New Crypto Rules Could Tap $82B Insurance Market

Hong Kong is moving to become the first jurisdiction in Asia to establish explicit regulations allowing insurance companies to invest in cryptocurrencies, according to a Bloomberg report.

The Hong Kong Insurance Authority (IA) is proposing new rules that would channel insurance capital into digital assets, including cryptocurrencies and stablecoins.

Cautious Green Light for Insurers, Not Prohibition

Under the proposal, crypto assets would carry a 100% risk charge, requiring insurers to set aside capital reserves equivalent to the value of any crypto investments. The charge may appear restrictive, but industry observers note it represents regulatory approval rather than a ban.

Hong Kong’s insurance sector recorded approximately HK$635 billion ($82 billion) in gross premiums in 2024 across 158 authorized insurers. Even a small allocation from this capital pool could bring significant institutional liquidity into the crypto market.

Stablecoins would receive more favorable treatment, with risk charges based on the fiat currency to which they are pegged. This makes stablecoins more capital-efficient than volatile cryptocurrencies, potentially drawing conservative institutional investors first. Hong Kong launched its stablecoin licensing regime last August, and the city’s de facto central bank is expected to grant the first batch of licenses early next year.

The proposal will undergo public consultation from February through April 2026, followed by legislative submissions. The consultation period will allow the industry to raise concerns about custody, valuation, and risk management. Regulators will weigh whether the 100% charge strikes the right balance between prudence and innovation.

The framework also includes capital incentives for infrastructure investments in Hong Kong and mainland China, particularly projects related to the Northern Metropolis development near the Chinese border. This suggests the crypto provisions are part of a broader policy package aimed at mobilizing private capital for government priorities.

Regional Divergence Widens

Hong Kong’s approach stands in contrast to other major Asian financial centers. Singapore banned credit card purchases of crypto and the use of promotional incentives. It now requires retail investors to pass risk awareness tests before trading. South Korea is gradually lifting its 2017 institutional ban, allowing nonprofits and listed companies to trade by late 2025. However, banks and insurers remain prohibited from direct crypto holdings. Japan‘s insurance regulations currently exclude cryptocurrencies from eligible investment assets, though a 2026 reclassification may open the door to institutional products.

This divergence positions Hong Kong as the region’s primary gateway for institutional crypto investment. The city has been aggressively building its digital asset framework. It has already approved spot Bitcoin and Ethereum ETFs earlier this year.

What’s Next

Market participants in Hong Kong will closely monitor the consultation process on potential amendments to risk charge levels and eligible asset categories. Some firms are already lobbying to expand coverage to a broader range of infrastructure projects beyond the current limited options.

If implemented as proposed, Hong Kong’s framework could serve as a template for other Asian regulators considering institutional crypto access, potentially accelerating regional adoption timelines.