The Last Round for Crypto Trust Service Providers in Hong Kong?

Introduction

Hong Kong is moving steadily towards a fully licensed virtual asset (“VA”) market. After the licensing regime for VA trading platforms took effect in June 2023 and the stablecoin issuer regime took effect in August 2025, the Government has now confirmed that a bill introducing new licensing regimes for VA dealing, custody, advisory and management services will be put before the Legislative Council within 2026 [7][11][12][15]. For trust or company service providers (“TCSPs”) that hold crypto assets on trust for customers of crypto exchanges and other crypto businesses, the custody regime is the most significant development since the TCSP licensing regime itself began in 2018. This article looks at how TCSPs have been used in the crypto field, what the new custodian law will require, and what this means for TCSPs and their clients.

What a TCSP Is

Part 5A of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”) requires any person carrying on a trust or company service business in Hong Kong to be licensed by the Registrar of Companies [1]. The licensing regime commenced on 1 March 2018, and applicants, their directors and their ultimate owners must pass a fit-and-proper test [2]. A “trust or company service” includes forming companies, acting as a director or company secretary, providing a registered office or business address and, most importantly for present purposes, acting (or arranging for another person to act) as a trustee of an express trust or as a nominee shareholder [1]. The Companies Registry has also made clear that a company registered as a trust company under the Trustee Ordinance (Cap. 29) still needs a TCSP licence, and that a company acting only as a custodian trustee holding trust assets for another person will generally need one if it does so by way of business [3].

How TCSPs Have Been Used in the Crypto Field

Because Hong Kong has, until now, had no dedicated licence for the safekeeping of VAs, the trust has become the natural legal vehicle for holding crypto assets on behalf of customers. A trust separates the customer’s beneficial ownership from the platform’s own assets, and a licensed TCSP is the regulated person that can act as trustee. In practice, TCSPs have been used in three main ways:

• VA trading platforms. The Securities and Futures Commission (“SFC”) requires a licensed VA trading platform to hold client assets on trust only through its “Associated Entity”, which must be incorporated in Hong Kong, be a wholly owned subsidiary of the platform and hold a TCSP licence under the AMLO [4]. The Associated Entity may not conduct any business other than receiving or holding client assets for the platform, and it must keep 98% of client VAs in cold storage [4].
• Independent digital asset custodians. Several of Hong Kong’s best-known institutional custodians operate as trust companies registered under the Trustee Ordinance and licensed as TCSPs under the AMLO. Hex Trust, for example, describes itself as a registered trust company holding a TCSP licence [5], and First Digital Trust Limited discloses both a TCSP licence and registration under section 78(1) of the Trustee Ordinance [6].
• Trust structures for other crypto businesses. Crypto exchanges, OTC desks, payment businesses and other VA service providers that are not themselves licensed platforms have used TCSP-licensed trustees to hold customers’ crypto assets on express trust. This gives customers the protection of a trust and gives the business a Hong Kong regulated counterparty, even though no Hong Kong regulator currently licenses VA custody as such.

In each case, the TCSP licence has provided the regulatory basis for a Hong Kong entity to hold crypto assets on trust. It is important to note, however, that the TCSP regime is primarily an anti-money laundering regime: it tests fitness and properness and imposes customer due diligence and record-keeping obligations, but it does not set technical standards for private key management, capital or insurance [1][2].

The Upcoming Custodian Law

On 24 December 2025, the Financial Services and the Treasury Bureau (“FSTB”) and the SFC published consultation conclusions on the licensing regimes for VA dealing and custodian service providers [7][8]. The Government stated that the custody regime “will focus on managing risks relating to safekeeping private keys of client VAs in Hong Kong, which is the core risk area of VA custody” [7]. The key features are as follows:

• A VA custodian licence will be required by any person who, by way of business, safekeeps instruments enabling the transfer of clients’ VAs, including private keys [9][10]. The test is technology neutral and turns on whether the entity can unilaterally transfer client VAs [9][10].
• Who is caught. The FSTB and the SFC expect that associated entities of SFC-licensed platforms, banks, stored value facilities and Type 13 licensed corporations will need a licence or registration if they safekeep private keys themselves [9]. Trustees and fund managers that delegate VA custody to a third-party custodian will not need to be licensed [10].
• Proposed exemptions include entities that only hold VAs for their group companies, licensed stablecoin issuers holding their own stablecoins, and legal and accounting professionals appointed to hold back-up keys or appointed by a court [9].
• Financial resources and personnel. Custodians will need a minimum paid-up share capital of HK$10 million and liquid capital of HK$3 million (banks excepted) [10]. Individuals with access to private keys, signing authority or key recovery systems will need to be individually licensed [9].
• No deeming arrangement. There will be no deeming arrangement for existing VA custodians. The regime will take full effect on the commencement date of the statutory provisions, although an expedited process will be available to associated entities of licensed platforms and banks already assessed by the SFC or the Hong Kong Monetary Authority [9][10].
• Knock-on effect for dealers. Licensed VA dealers will generally be required to keep client VAs with SFC-regulated custodians [13].

The Government reaffirmed the timetable to the Legislative Council Panel on Financial Affairs on 1 June 2026, stating that any person carrying on a business of providing VA custodian services in Hong Kong will need to be licensed by or registered with the SFC and that the regime will take full effect on commencement [11]. On 5 October 2026, the Secretary for Financial Services and the Treasury confirmed that the amendment bill would be submitted within this year [12]. As at the date of this article, the bill has not yet been published, and the final details (including the commencement date) may change.

Implications for TCSPs

The new law will change the role of TCSPs in the crypto sector in several important ways:

• A TCSP licence alone will no longer be enough. Once the custody regime commences, a TCSP that holds the private keys to customers’ crypto assets will be carrying on a VA custodian service and will need an SFC licence, regardless of whether it holds the assets on trust [9][10]. Without a deeming arrangement, any TCSP that is not licensed on day one will have to stop providing that service or restructure it [9].
• A much higher entry threshold. The HK$10 million paid-up capital and HK$3 million liquid capital requirements, together with individual licensing of key personnel [9][10], place SFC-licensed custody beyond the scale of many small and mid-sized TCSPs that currently provide crypto trust services.
• The trustee role narrows. TCSPs may still act as top-layer trustees, but only where they delegate the safekeeping of private keys to an SFC-regulated custodian [10]. The TCSP’s role would then become largely administrative and contractual, with the custodian holding the keys.
• Fewer crypto clients for unlicensed custodians. Because licensed VA dealers will generally have to use SFC-regulated custodians [13], crypto businesses that come within the new dealing regime are unlikely to be able to continue using a TCSP that is not also licensed as a VA custodian.
• A wider tightening of the trust sector. Separately, the 2026 Policy Address indicated that the FSTB would consult the public within 2026 on legislative proposals to enhance the transparency of beneficial ownership of companies and express trusts, in line with the latest international anti-money laundering standards [14]. TCSPs should expect closer scrutiny of trust arrangements generally, not only those involving crypto assets.

Conclusion

For several years, the TCSP licence has been the main regulatory route by which Hong Kong entities have held crypto assets on trust for customers of crypto exchanges and other crypto businesses. The new custodian law will bring that period to an end. Once the bill is passed and commences, the safekeeping of customers’ private keys will require an SFC licence, with significant capital and personnel requirements and no deeming arrangement for existing providers. In light of the new custodian law, the current applicants and new licensees may well be the last round of TCSPs able to offer trust services over the crypto assets of customers of crypto exchanges and crypto businesses on the basis of a TCSP licence alone. Businesses considering this route should act now, while the existing framework remains available, and should plan for the transition to the new regime.

Sources

[1] Companies Registry, Guideline on Licensing of Trust or Company Service Providers: https://www.tcsp.cr.gov.hk/tcspls/portal/guide/1033/eng/TCSP_G1_revised_May2025-e.pdf

[2] Companies Registry, Regulation of Trust or Company Service Providers (presentation): https://www.cr.gov.hk/en/publications/docs/speech20180423_01-e.pdf

[3] Companies Registry, Frequently Asked Questions – Trust Companies: https://www.tcsp.cr.gov.hk/tcspls/portal/faq/54/eng/TCSP_FAQ4-e.pdf

[4] Securities and Futures Commission, Licensing Handbook for Virtual Asset Trading Platform Operators (July 2025) and Guidelines for Virtual Asset Trading Platform Operators: https://www.sfc.hk/-/media/EN/assets/components/Guidelines/File-current/Licensing-Handbook-for-VATPs_July-2025.pdf?rev=4ca421d144034e2b94c52c2d9bbae9bc

[5] Hex Trust, Trust Center (licences and registrations): https://www.hextrust.com/trust-center

[6] First Digital, Legal and Regulatory Information: https://1stdigital.com/legal-and-regulatory/

[7] HKSAR Government press release, FSTB and SFC publish consultation conclusions on legislative proposals (24 December 2025): https://www.info.gov.hk/gia/general/202512/24/P2025122400265.htm

[8] Securities and Futures Commission, Consultation Conclusions on Legislative Proposal to Regulate Virtual Asset Custodian Services: https://apps.sfc.hk/edistributionWeb/gateway/EN/consultation/conclusion?refNo=25CP7

[9] Gibson Dunn, Hong Kong Concludes Consultations on Regulation of Virtual Asset Dealing and Custodian Services: https://www.gibsondunn.com/hong-kong-concludes-consultations-on-regulation-of-virtual-asset-dealing-and-custodian-services-with-yet-more-to-come/

[10] Charltons, FSTB and SFC Conclude Consultation on Licensing Regime for Virtual Asset Custodians: https://www.charltonslaw.com/fstb-and-sfc-conclude-consultation-on-licensing-regime-for-virtual-asset-custodians/

[11] Legislative Council Panel on Financial Affairs, LC Paper No. CB(1)530/2026(06) (1 June 2026): https://www.legco.gov.hk/yr2026/english/panels/fa/papers/fa20260601cb1-530-6-e.pdf

[12] Fintech Hong Kong, Hong Kong Targets Year-End for Wider Virtual Asset Licensing Bill (7 October 2026): https://fintechnews.hk/41126/blockchain/christopher-hui-policy-address-2026-legco-briefing/

[13] Simmons & Simmons, Five takeaways on the new Hong Kong virtual asset regulatory regime: https://www.simmons-simmons.com/en/publications/cmjwp982e05mevlz0kpafy3mr/latest-consultation-conclusions-on-the-new-sfc-va-regime-key-takeaways

[14] Hong Kong Economic Times, 2026 Policy Address report (16 September 2026): https://inews.hket.com/article/4194515/policy-address-2026-ai-fraud-virtual-assets-rwa

[15] Legislative Council, Replies to initial questions on the Estimates of Expenditure 2026-27 (Financial Services and the Treasury Bureau): https://www.legco.gov.hk/yr2026/english/fc/fc/w_q/fstb-fs-e.pdf