Hong Kong's Monetary Authority is proposing a draft guidance to ease capital requirements for banks holding certain crypto assets, reflecting its ambition to become a leading crypto hub.

These new standards are set to be implemented in early 2026, as part of Hong Kong's efforts to modernize its regulatory framework for the digital asset sector.

Hong Kong maintains a progressive stance on crypto regulation, with licensing frameworks for exchanges and stablecoin issuers, contrasting sharply with China's ongoing crypto ban.

While the final details are still being finalized, the crypto community is optimistic that these changes will attract more banks and investors to the market.

The draft guidance is currently open for public consultation and is scheduled for implementation in 2026.

Regulators are cautiously approving stablecoin issuers, aiming to balance innovation with risk management and warning against speculation and fraud.

Experts believe that increased bank involvement will boost market liquidity, reduce volatility, and enable new banking services like crypto storage and digital-backed loans.

Recent rule changes will allow banks to hold larger crypto holdings, encouraging more traditional banks to participate in the crypto market.

The first licenses for crypto assets under this new framework are expected early next year, giving banks time to prepare before the capital rules take effect, setting Hong Kong apart from regions like the US and EU with stricter regulations.

The draft introduces a new supervisory manual, CRP-1, aligning local regulations with Basel Committee standards, set to take effect in early 2026.

The proposed rules suggest that crypto assets on permissionless blockchains could qualify for lower capital requirements if issuers demonstrate effective risk management.

The guidelines aim to lower capital reserves for banks that implement proper risk prevention and response measures, encouraging the crypto industry.

The new framework categorizes crypto assets into two main groups and four subgroups, including tokenized traditional assets, stablecoins, and non-backed assets like Bitcoin and Ethereum, with further subdivisions based on hedging criteria.