Johnny Ng Supports Hong Kong’s New Crypto Trading and Custody Rules

TLDR

• Hong Kong will require mandatory licensing for crypto dealers and custodians by 2026 to enhance investor protection.
• New regulations will enforce strict security protocols for custodians, including asset segregation and private key protection.
• Hong Kong’s crypto framework aligns with traditional financial laws, boosting transparency and reducing fraud risks.
• Industry feedback shows strong support for clear crypto regulations, paving the way for institutional involvement and secure growth.

Hong Kong is set to introduce new regulations for crypto dealers and custodians by 2026, requiring mandatory licensing and stricter client safeguards. This move follows extensive public consultations and aims to strengthen investor protection, combat fraud, and bring crypto services under formal regulation. By aligning the digital asset sector with traditional financial standards, Hong Kong is positioning itself as a leader in the global effort to regulate crypto markets while promoting transparency and security in the growing industry.

Hong Kong Sets 2026 Laws for Crypto Dealers & Custodians

Hong Kong is preparing to introduce comprehensive new regulations for crypto dealers and custodians, set to be enforced in 2026. The Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) have outlined mandatory licensing requirements for virtual asset businesses, which include over-the-counter (OTC) trading, brokerage services, and custodianship of digital assets. This move follows the conclusion of public consultations and aims to enhance investor protection, curb fraudulent activities, and align the digital asset sector with established financial regulations.

The new rules will require crypto dealers, including those handling fiat-to-crypto conversions and advisory functions, to meet standards similar to traditional securities dealers. Custodians, responsible for safekeeping client assets, will be subject to strict security protocols, including the segregation of holdings and enhanced protection for private keys. Licensed dealers will also be required to partner with licensed custodians, ensuring that client assets are only entrusted to firms with the necessary regulatory oversight.

This regulation is part of Hong Kong’s ongoing efforts to integrate virtual asset businesses within its existing financial regulatory framework, which already includes the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. These measures will raise the standards for crypto services, making compliance and transparency key elements of the industry.

Hong Kong Tightens Regulations – Bullish Outlook for Industry

On December 24, 2025, Hong Kong officially announced its plans to move forward with legislation that will require crypto dealers and custodians to obtain mandatory licenses. This comes after extensive consultations that garnered substantial feedback from industry stakeholders. The new rules are set to target crypto activities such as OTC trading, brokerage, block trading, and custodial services, all of which will now be formally regulated.

The goal of the new framework is to provide a clear legal structure for the virtual asset sector, which has seen rapid growth but also significant risks, including fraud and lack of investor protection. As part of the regulatory updates, custodians will be tasked with maintaining client asset security through measures like asset segregation and stringent private key protection. This marks a shift towards more secure and transparent operations in the crypto space, with compliance playing a pivotal role in the future development of the industry.

Industry Adjustments and Market Reactions

The proposed regulations are expected to significantly impact both crypto service providers and their clients. Industry participants will need to adjust to the new licensing requirements, which could lead to increased operational costs and regulatory compliance burdens. However, these changes are likely to benefit businesses that operate transparently and adhere to high standards of security, positioning themselves as trusted players in the industry.

The consultation process has already revealed strong support from industry groups, with many emphasizing the importance of clear and consistent regulations. While there is some concern about the complexity of the licensing process, overall feedback has been positive. Stakeholders are optimistic that these regulations will pave the way for more institutional participation in the crypto market, as well as more robust safeguards for consumers.

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