Hong Kong to introduce mandatory licensing for crypto dealers and custodians

The Hong Kong government’s 2026-27 Budget includes provisions for what authorities refer to as “new quality productive forces,” covering changes to tax laws and licensing requirements for individuals and institutions dealing with digital assets. 

Hong Kong’s government has adjusted its digital asset laws in order to ensure the protection of investors and the inflow of revenue from wealthy individuals and businesses. 

New licensing requirements in Hong Kong 

Hong Kong’s Financial Secretary Paul Chan revealed the country’s 2026-27 Budget and explained that Hong Kong is starting a National 15th Five-Year Plan. The budget outlines a clear path for the country to become an integral part of the financial and technological sectors globally. 

Chan argued for Hong Kong to use its unique position of being connected to both Mainland China and the rest of the world to foster “new quality productive forces” to open new markets and attract more international talent.

The digital asset sector is a major part of this strategy. The government and the Securities and Futures Commission (SFC) are working together to complete the city’s regulatory framework for the sector and create a safe and efficient environment for all types of digital financial activities. 

The SFC will also establish a Digital Asset Accelerator to help companies create innovative trading projects.

In June 2025, the Financial Services and the Treasury Bureau (FSTB) and the SFC began consulting on new rules for digital assets dealing and custody. By the end of 2025, these proposals were finalized. The 2026-27 Budget confirms that legislation will be introduced this year to regulate these service providers.

This new law will require over-the-counter (OTC) brokers, block traders, and firms that deal in digital assets or provide custodial services to have a license. Unlike earlier rules, there will be no exemptions for banks. Any bank that wants to offer these services must be registered with the SFC. 

The Stablecoins Ordinance, which came into effect on August 1, 2025, requires issuers to have 100% reserve backing for their tokens. Only licensed issuers can offer stablecoins to retail investors, therefore preventing scams and protecting the value of the Hong Kong dollar.

Hong Kong integrates technology into traditional finance

The Hong Kong government’s “new quality productive forces” are created by blending finance with advanced technology like Artificial Intelligence (AI). Mr. Chan announced the creation of the Committee on AI+ and Industry Development Strategy. This committee will help different industries use AI to become more efficient. The government is also building the Sandy Ridge data facility cluster to support the massive amount of data needed for AI research. 

In traditional finance, the SFC and the Hong Kong Exchanges and Clearing Limited (HKEX) are moving toward a T+1 settlement cycle, meaning that trades will be settled in one day instead of two. 

The change reduces the risk of defaults and makes the market more efficient. The government is also working to implement an uncertificated securities market this year, eliminating the need for paper stock certificates.

The government will change tax laws in the first half of 2026 to be more attractive for family offices. The new rules will allow digital assets, precious metals, and commodities to qualify for tax breaks. 

Previously, it was not always clear if these assets were tax-exempt. By making them qualifying investments, the government hopes more wealthy families will move their money to Hong Kong. The scope of funds will also expand to include funds-of-one, which are often used by single families.

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