The Hong Kong central bank will implement the new capital management standards for cryptocurrency assets starting from January 1, 2026.

The new regulation requires banks to maintain minimum capital equivalent to the value of cryptocurrency assets using unpermissioned blockchain technology to control risks in the digital asset sector.

MAIN CONTENT

  • Hong Kong will apply the new Basel standards for cryptocurrency assets from January 1, 2026.

  • Banks must maintain capital at a 1250% risk ratio for permissionless cryptocurrency assets.

  • High capital requirements pose challenges for banks in holding cryptocurrency assets.

What are the new banking capital regulations for cryptocurrency assets in Hong Kong?

The Hong Kong Central Bank issued a new regulation applying Basel standards for managing cryptocurrency assets starting from January 1, 2026, to ensure the safety of the financial system.

This regulation requires banks to maintain Tier 1 capital equivalent to at least 1250% of the risk weight for permissionless blockchain-based cryptocurrency assets. This means that these types of cryptocurrency assets are assessed as having very high risk in the bank's capital evaluation.

The Basel standards established by the Basel Banking Supervision Committee aim to enhance the robustness and stability of the global banking system, which has been refined and implemented by Hong Kong to control risks arising from digital assets.

What impact does the 1250% risk standard have on banks in Hong Kong?

Setting risk weights up to 1250% means that banks must hold capital equivalent to at least a 1:1 ratio compared to the permissionless cryptocurrency assets they hold.

This high capital requirement is a significant barrier for banks, causing many financial institutions to hesitate in holding cryptocurrency assets, as they must secure a very large amount of capital, affecting profitability and capital risk management.

This perspective was provided by Faith, a partner at King & Wood Mallesons and lecturer at the Faculty of Law, University of Hong Kong, in an exclusive interview with Caixin, highlighting the strictness of the regulations and their direct impact on the digital asset sector in Hong Kong.

“Setting such high-risk weights will make it difficult for banks to accept holding permissionless cryptocurrency assets due to the very large capital requirements.”
– Faith, Partner at King & Wood Mallesons, Lecturer at the Faculty of Law, University of Hong Kong, 2023

How does this regulation reflect the global trend in managing cryptocurrency assets?

The application of Basel standards for capital management of cryptocurrency assets in Hong Kong aligns with international trends, as many central banks and financial institutions enhance standards to control digital asset risks.

Strict standards help limit systemic risks and protect depositors, while also creating barriers to prevent banks from excessive exposure to volatile and legally ambiguous assets.

This decision also encourages organizations to develop solutions that strictly comply with laws and international standards to sustainably develop the cryptocurrency asset sector.

Frequently Asked Questions

When will the new regulation take effect?

The regulation applies from January 1, 2026, to all banks in Hong Kong.

Why is the risk weight so high at 1250%?

Due to the significant volatility and legal risks of permissionless cryptocurrency assets, banks must hold corresponding capital.

Will this regulation reduce the development of cryptocurrency assets in Hong Kong?

High capital requirements may limit banks' holdings but simultaneously enhance safety and transparency for the market.

Who provided the analysis on this regulation?

Faith, a partner at King & Wood Mallesons and lecturer at the Faculty of Law, University of Hong Kong, is a cited expert.

Does this regulation apply to permissioned cryptocurrency assets?

The content only mentions permissionless assets, with no information about permissioned assets.

Source: https://tintucbitcoin.com/hong-kong-ap-dung-basel-cho-tai-san-tien-dien-tu/

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