HKMA Aligns With Basel Standards
The Hong Kong Monetary Authority (HKMA) is considering changes to capital requirements for banks that hold digital assets, signaling a potential shift toward a friendlier regulatory climate for crypto finance. Local media reported Wednesday that the central bank introduced CRP-1, a new supervisory policy manual module, which outlines how virtual assets should be treated under the Basel Committee on Banking Supervision’s standards.
The HKMA confirmed in August that Basel standards will take effect in Hong Kong in early 2026, but it has now opened consultation with local banks to decide how to adapt these rules within the region’s regulatory framework.
Differentiating Crypto Assets
Currently, Basel rules impose a punitive 1,250% risk weight on digital assets, requiring banks to hold capital equivalent to 100% or more of the asset’s value as a buffer against losses. This has made it largely uneconomical for financial institutions to work with crypto.
The HKMA’s proposal could change that. Under the draft guidelines, cryptocurrencies built on permissionless blockchains may qualify for reduced capital requirements if their issuers demonstrate effective risk management and mitigation measures.
The new approach separates tokenized assets and regulated stablecoins from unbacked crypto like Bitcoin and Ethereum, acknowledging differences in stability and backing. This could give banks more flexibility to engage with the sector while keeping systemic risks under control.
Stablecoins Under Tight Oversight
The HKMA is also setting stringent conditions for stablecoin issuers, particularly those pegged to the Hong Kong dollar. According to the proposed framework, issuers must be licensed and meet minimum financial thresholds, including HK$25 million in share capital and HK$3 million in liquid capital, along with enough excess liquidity to cover 12 months of operating expenses.
Issuers must allow holders to redeem at par value within one business day, and they are barred from charging excessive fees or imposing unfair conditions on redemption.
The HKMA warned that any company conducting regulated stablecoin activity without a license faces penalties of up to HK$5 million in fines, seven years in prison, and a daily fine of HK$100,000 for continued violations.
Strengthening Investor Protections
Alongside the HKMA’s proposals, the Securities and Futures Commission (SFC) has been tightening its oversight. In August, the SFC updated its guidance for licensed crypto platforms, requiring stronger custody practices to protect client funds.
The SFC cited recent overseas failures that exposed vulnerabilities and led to heavy customer losses. Its new standards cover cold wallet infrastructure, real-time threat monitoring, third-party wallet oversight, and senior management accountability.
Together, these moves reflect Hong Kong’s commitment to balancing innovation with investor safety, ensuring that as digital finance grows, safeguards remain in place.
Hong Kong’s Bid to Lead Global Crypto Finance
Hong Kong has steadily built a regulatory foundation for crypto, including licensing regimes for exchanges and stablecoin issuers. By softening the most restrictive aspects of global capital rules, it hopes to make the city a more attractive hub for banks and institutional players.
With the tokenization of assets expanding globally, and institutions like BlackRock exploring blockchain-based ETFs, Hong Kong’s approach could put it ahead of rivals in shaping how traditional finance merges with digital markets.
