Financial Secretary Paul Chan Pushes Digital Asset Policy Bill as SFC Regulates

(HONG KONG) — Financial Secretary Paul Chan Mo-po announced a broad expansion of Hong Kong’s digital asset rules and incentives in the 2026-27 Budget on February 25, 2026, setting out new licensing laws, stablecoin approvals and tax changes aimed at widening regulated access to the sector.

Chan’s budget package combined licensing, market-development measures and tax and reporting changes that the government framed as a coordinated build-out of investor protection, compliance and market infrastructure alongside innovation.

The measures signaled a push to deepen Hong Kong’s offer to financial services firms, fintech companies and cross-border investors by tightening supervision while expanding the range of activities that can operate inside a clearer legal perimeter.

The government said it will introduce a Digital Asset Policy Bill in 2026 to establish licensing regimes for digital asset dealing and custodian service providers, bringing into scope over-the-counter (OTC) brokers, traders and custody firms.

By targeting both dealing and custody, the planned legislation would reach business models that sit alongside trading platforms, including brokerage-style execution desks, proprietary trading operations, and standalone custody providers that safeguard client assets.

A notable element of the proposal requires banks that offer digital asset dealing or custodial services to register with the Securities and Futures Commission (SFC), with no exemptions, placing banks and non-banks under a single supervisory expectation for these activities.

Hong Kong also pointed to a stablecoin licensing track already set under the Stablecoins Ordinance, which implemented a fiat-referenced stablecoin issuer regime designed to allow issuance within a regulated framework.

Under that regime, the first batch of licenses will be issued in March 2026, a milestone that sets an early pace for regulated stablecoin activity in the city’s market.

Regulators said they will support compliant use cases in payments and settlements, positioning licensed issuance around transaction and settlement functions rather than purely speculative issuance.

The licensing pathway could shape how stablecoins integrate with token listings, banking relationships and corporate treasury use, because the regime ties issuance to formal approvals that counterparties and service providers can recognize.

Alongside new licensing rules, the SFC will move to broaden access for professional investors as part of a market-expansion agenda, with Hong Kong describing steps to enhance liquidity by offering more digital-asset-related products and services.

Authorities cited margin financing and derivatives as examples of product broadening, linking any expansion in available services to a direction of travel that remains within a regulated setting for professional investors.

The SFC also plans to launch a Digital Asset Accelerator, which Hong Kong described as a channel for innovation, with the intent of supporting new activity that can be tested and developed on compliant rails.

Hong Kong paired that market-development push with a tokenization agenda focused on bond-market infrastructure, including guidelines that will allow distributed ledger registers for debenture holders and the use of electronic signatures for bond issuance.

The government said it will also enable digital bearer bonds, and it plans to issue tokenized bonds regularly as part of making tokenization a repeatable feature of the local capital markets.

A separate plank involves establishing a digital asset platform in 2026 for issuance, settlement and regional connectivity, reflecting an emphasis on linking market infrastructure across processes and jurisdictions.

On the tax side, Hong Kong said digital assets, precious metals and specified commodities will be explicitly classified as qualifying investments eligible for tax relief, effective from the 2025/2026 tax year.

That classification ties the digital asset strategy to family office and fund activity by widening the asset classes that can fall within concession frameworks, potentially affecting allocation choices and the structuring of investment vehicles based in the city.

Hong Kong will also expand the definition of “fund” to include funds-of-one for single-family vehicles, and it plans an amendment bill for the first half of 2026 to carry the changes.

Tax transparency formed another pillar, with Hong Kong planning Inland Revenue Ordinance amendments to implement OECD standards for information reporting and exchange that reach into crypto-asset activity.

The government said the bill covering the Crypto-Asset Reporting Framework (CARF) and the amended Common Reporting Standard (CRS) will come in the first half of 2026, setting timelines that can drive systems work for firms that must collect, validate and report data.

Under the sequencing provided, CARF will take effect on January 1, 2027, and the amended CRS will take effect on January 1, 2028, setting a staged compliance horizon for affected businesses.

Platforms, brokers and custodians are among the businesses most exposed to the reporting and information-exchange direction described, while parts of the financial system that interface with those firms may also need to adjust to the same timelines.

Hong Kong framed the overall package as a second policy statement meant to position the city as a global digital asset hub while balancing innovation, investor protection and compliance, an approach it cast as a policy signal in a competitive regional environment.

The government pointed to competition from Singapore and Dubai in describing the stakes for attracting capital, firms and talent, while using the combined effect of licensing, market expansion, tokenization, tax incentives and transparency rules to present a single policy message.

Hong Kong also said the reforms align with China’s 15th Five-Year Plan for “new quality productive forces” in finance and technology, tying the city’s digital asset agenda to broader themes it cited around financial development and technological capacity.