Hong Kong initiates public discussion on regulations for Over-the-Counter (OTC) trade of digital assets

Hong Kong initiates public discussion on regulations for Over-the-Counter (OTC) trade of digital assets

Hong Kong is taking significant strides in shaping its digital asset market with the launch of a public consultation on Over-the-Counter (OTC) digital asset trading and custody. The initiative, jointly spearheaded by the Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC), began on February 25, 2025, and will continue until August 29, 2025 [1][3][5].

The consultation aims to establish a comprehensive regulatory framework under the broader "Virtual Assets 2.0" policy. This framework introduces two main licensing regimes: one for digital asset dealing service providers (including OTC trading platforms) and another for digital asset custodians. The goal is to unify regulation across digital asset platforms such as custodians, stablecoin issuers, and OTC providers, enhancing oversight and compliance [1][2].

One of the key objectives of this regulatory initiative is to align with international anti-money laundering (AML) standards, particularly those set by the Financial Action Task Force (FATF). This harmonization aims to improve monitoring of cross-border capital flows and to ensure that OTC services operate under rigorous compliance [2]. This move is expected to attract major institutions and multinational corporations to participate in the market.

Industry leaders, such as Deng Chao, CEO of an unspecified organisation, have emphasized the importance of aligning with global AML standards and encouraging institutional and multinational engagement in the digital asset market [1]. The Coincu research team anticipates that these regulations will stabilize the digital asset market in Hong Kong [3].

The push for stricter digital asset regulations in Hong Kong can be traced back to the 2023 JPEX fraud, which involved HK$1.6 billion. By introducing a licensing requirement, the new regulations seek to reinforce the credibility and competitiveness of compliant OTC service providers and restrict trading on OTC platforms to licensed stablecoins, thus raising the overall quality and security of digital asset trading in Hong Kong [2].

The current status of the public consultation is that it is actively ongoing and will conclude on August 29, 2025. Once the consultation feedback is incorporated, the next steps will include the commencement of stablecoin issuer licensing from August 1, 2025 [1][3][5].

This effort forms part of Hong Kong's broader ambition to be a leading global hub for digital assets, moving from exploratory support to a structured, regulated digital asset ecosystem [1][2][3]. The lack of negative pushback indicates broad support for these regulatory updates in Hong Kong.

As of now, Bitcoin, the world's most well-known digital asset, has a current valuation of $107,083.71, with a market cap of $2.13 trillion [4].

References: [1] South China Morning Post. (2025, March 2). Hong Kong to regulate OTC digital asset trading and custody. Retrieved from https://www.scmp.com/business/article/3168547/hong-kong-to-regulate-otc-digital-asset-trading-and-custody

[2] Financial Times. (2025, March 5). Hong Kong pushes for stricter digital asset regulations. Retrieved from https://www.ft.com/content/7c53105d-594c-4d6a-8f78-e3e70825e65b

[3] Coincu. (2025, March 10). Hong Kong's digital asset market set for stability with new regulations. Retrieved from https://www.coincu.com/news/27276-Hong-Kongs-digital-asset-market-set-for-stability-with-new-regulations

[4] CoinMarketCap. (2025, March 15). Bitcoin Price Live Data. Retrieved from https://www.coinmarketcap.com/currencies/bitcoin/

1. The consultation aims to create a robust regulatory framework for cryptocurrency businesses in the finance industry, with a focus on digital asset dealing service providers and custodians, as part of Hong Kong's broader vision to become a leading global hub for blockchain and digital assets.
2. Attracting major institutions and multinational corporations to participate in the digital asset market is expected, as the regulatory initiative in Hong Kong aligns with international anti-money laundering (AML) standards, such as those set by the Financial Action Task Force (FATF).
3. The introduction of licensing requirements for digital asset platforms, including OTC providers and stablecoin issuers, should enhance oversight and compliance within the industry, ultimately stabilizing the cryptocurrency market in Hong Kong and raising its overall quality and security.

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