According to BlockBeats, on January 20, Hong Kong securities industry groups submitted objections to regulators regarding the proposed local regulatory framework for digital asset management, warning that the reforms could inadvertently raise barriers for traditional asset managers seeking exposure to crypto assets and thereby dampen market participation.
In its submission to regulators, the Hong Kong Securities and Futures Professionals Association specifically opposed the proposed removal of the existing “minimum exemption threshold” applicable to Type 9 (asset management) license holders. Under the current regulatory regime, institutions holding a Type 9 license are only required to notify regulators—rather than apply for an additional virtual asset management license—if less than 10% of the assets under management in a fund are allocated to crypto assets.
However, under the proposed regulatory adjustments, this proportional exemption would be abolished. As a result, even asset managers allocating as little as 1% of a portfolio to Bitcoin exposure would be required to obtain a full virtual asset management license. Industry representatives argue that this “one-size-fits-all” regulatory approach fails to adequately reflect differences in risk exposure and does not sufficiently embody the principle of proportionality.
Balancing Compliance Costs and Market Participation
The industry association noted that imposing full, high-standard compliance requirements in cases of limited risk exposure could create disproportionate compliance costs for traditional asset managers, thereby reducing their willingness to experiment with or gradually explore crypto asset classes. For institutions whose core business remains focused on traditional assets, such regulatory changes may slow their pace of entry into the digital asset space.
This feedback comes at a time when Hong Kong’s digital asset regulatory framework is advancing rapidly. In December of last year, regulators released a consultation conclusions report following a public consultation and continued discussions on introducing a supplementary licensing regime covering crypto asset trading, advisory, and management services—signaling a regulatory intent to achieve broader and more comprehensive oversight.
From Regulatory Design to Risk Governance Capabilities
From a broader regulatory perspective, the primary objective of regulators is not to constrain innovation, but to ensure that risks remain controllable, transactions are transparent, and responsibilities are clearly defined. As crypto assets become increasingly integrated into the traditional financial system, regulatory focus is shifting away from asset categories themselves toward continuous monitoring of transaction behavior, fund flows, and risk exposure.
In practical compliance operations, capabilities related to the analysis and identification of transaction behavior are becoming particularly critical. Through transaction monitoring systems such as Trustformer KYT, institutions can conduct risk identification and transaction path analysis on on-chain activity, enabling more granular and proportionate compliance support across varying levels of risk exposure.
Conclusion
Hong Kong’s ongoing debate over its digital asset management regulatory framework highlights a shared challenge faced by global financial centers as they incorporate crypto assets: how to strike an appropriate balance between robust regulation and market vitality. As regulatory clarity continues to improve, compliance frameworks that emphasize transaction transparency and risk identification will form a crucial foundation for the integration of traditional finance and digital assets.