Hong Kong’s Crypto Rules Under Fire: Liquidity at Risk?

Key Insights:

• Hong Kong’s closed crypto system loosened to improve global liquidity and investor market access.
• Regulators explore real-time monitoring and machine-readable rules to bridge tech and compliance.
• Licensing is seen as a growth tool, but access and flexibility remain under review by SFC.

*Hong Kong’s Crypto Rules Under Fire: Liquidity at Risk?*Hong Kong is adjusting its digital asset rules as it works to connect local markets with global liquidity. At the Finternet 2025 Asia Digital Finance Summit, regulators and industry figures discussed where Hong Kong stands and what still needs to change.

Local Rules Meet Global Markets

Since 2018, Hong Kong’s Securities and Futures Commission (SFC) has taken a cautious path. It began with a closed system built around licensed platforms to protect local investors. This approach provided structure but limited access to overseas markets.

“We realized this closed environment was limiting Hong Kong’s access,” said Elizabeth Wong, a director at the SFC. In November, the SFC allowed licensed platforms to share order books with overseas affiliates. This update could give local users access to wider liquidity and closer alignment with international pricing.

Regulation Shapes Business Decisions

Licensing is now seen by more firms as a strength. “Firms are recognizing the value of regulation,” Wong added, noting that a clear framework helps attract serious players. Hong Kong is also looking at new licenses for brokers and custodians to support wider market growth.

Wai Lum Kwok from Abu Dhabi’s financial authority shared that his region also applies traditional finance rules to crypto. “We’re asset-class agnostic,” he said. Both Hong Kong and the UAE are building systems that handle digital and traditional finance under one set of rules.

Cross-Border Rules and Market Access

Cross-border access is still a challenge. Regulators agree that stronger coordination is needed. “On the government-to-government level, the most effective approach is ongoing dialogue,” said Kwok. This helps align rules and build trust across regions.

Technology is playing a bigger role. Some regulators now use real-time tools to monitor activity. Others are working to make rules machine-readable, which could allow smart contracts to adjust automatically when regulations change.

Staying Flexible While Enforcing Rules

Hong Kong wants to allow growth without losing control. “If you aim for perfection, you might actually get it wrong,” said Eric Yip from the SFC. He explained that the city uses a mix of laws, guidelines, and consultations to stay flexible.

Licensing rules are being reviewed to let serious projects enter faster. Those that fail to meet standards may exit on their own. The goal is to support steady growth while keeping clear standards in place.