Hong Kong’s Securities Pros Demand Regulatory Relief: Ease Crypto Record-Keeping and Liability Burdens Now

Hong Kong's financial gatekeepers are pushing back—hard. Securities professionals are publicly urging regulators to slash the bureaucratic red tape strangling the city's crypto ambitions.

The Compliance Chokehold

It's a classic clash: innovation versus oversight. Frontline finance workers argue that current record-keeping mandates are relics of a pre-digital age, creating impossible administrative burdens that stifle growth and push talent—and capital—elsewhere. They want rules fit for blockchain speed, not paper-based ledgers.

Liability on the Line

The pressure isn't just about paperwork. The call extends to liability frameworks, where professionals feel exposed by vague regulations. They're seeking clearer, more reasonable guardrails that don't treat every crypto transaction as a potential compliance felony waiting to happen.

This isn't a polite request from a back-office memo; it's a direct challenge from the industry's operational core. The message is clear: if Hong Kong wants to be a serious crypto hub, its rulebook needs a serious upgrade. Otherwise, it risks becoming just another finance center that talked a big game about digital assets while its best deals sailed to friendlier shores—a tale as old as, well, finance itself.

HKSFPA bashes record-keeping rules for dissolved companies

According to the association’s responses, HKSFPA supports the proposed six-year record retention period, in line with the existing Inland Revenue Department and CRS standards. However, the group said it was concerned about the extension of record-keeping obligations for a dissolved entity.

“We generally agree with the six-year retention period to align with existing inland revenue and CRS standards, but we have concerns regarding the obligations placed on individuals post-dissolution.”

Per the association, forcing directors or principal officers to be responsible for recordkeeping after a company’s operations are officially shut down could expose them to indefinite liabilities and stonewall their compliance.

It recommends that the government cut off the access of former officers to the storage, funding, or any legal firm authorized to keep client data. Citing issues brought up by the PwC and the Financial Services Treasury Bureau, the group proposed appointing an independent third-party custodian, such as a liquidator or licensed corporate service provider, to take over record-keeping duties.

Calls for proportional registration requirements

When asked about the mandatory registration for RCASPs with any reporting nexus to Hong Kong, HKSFPA said it WOULD help ensure fair competition and prevent compliant firms from being undercut by unregulated operators. 

It conceded that mandatory registration would help the Inland Revenue Department identify the full population of RCASPs operating in or connected to the city. Still, a one-size-fits-all law could be excessive for firms that have “nil returns.”

“We recommend a lite registration or a simplified annual declaration process for RCASPs that anticipate filing Nil Returns, to reduce administrative costs while still satisfying the IRD’s oversight requirements,” HKSFPA wrote.

The group also noted that many private investment entities fall into this category and could face unnecessary administrative layers under the current proposal. It suggested that entities registered under CARF or holding a business registration number should be able to activate CRS registration through a simple portal selection.

On punishing companies that break the law, HKSFPA agreed that the administrative penalty is the best alternative to criminal prosecution. This, per the business rights advocates, could help resolve non-compliance issues and reduce legal costs for regulators and the industry.

However, it cautioned against applying a “per account” penalty of “$1,000 per account/user,” which is similar to the United Kingdom’s rules. The association warned that this could result in disproportionate penalties, saying a single software issue could lead to fines even where there was no intent to evade taxes.

“A reasonable excuse defense can be clearly codified for cases where RFIs relied on valid self-certifications that later turned out to be false, provided the RFI performed standard due diligence,” the group said.

Electronic filing systems for CARF submissions encouraged

When questioned about the filing system crypto asset service providers should use for CARF, the association was positive on electronic filing but encouraged the government to MOVE beyond manual uploads.

Some of its suggestions away from manual filings included Application Programming Interface and XML files, particularly for larger institutions with complex systems. Direct API connectivity would allow reporting processes to be automated, which would reduce filing errors and improve data consistency.

Manual uploads through an online portal, it said, reduce the efficiency of firms managing high transaction volumes. It said both options must be fully supported, with detailed XML specifications and testing environments made available at least a year before the system goes live.

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