Hong Kong’s insurance regulator is weighing a new capital framework that would allow insurers to allocate funds to cryptocurrencies while imposing some of the toughest risk charges seen in the market.
Key Takeaways:
- Hong Kong plans to allow insurers limited crypto exposure while imposing a 100% capital charge on unbacked crypto assets.
- Regulated stablecoins would face differentiated risk charges tied to their fiat backing.
- The proposal reflects Hong Kong’s effort to balance digital asset growth with strict financial safeguards.
Under the proposal, the Hong Kong Insurance Authority (IA) would apply a 100% risk charge to insurers’ exposure to crypto assets, according to documents reviewed by Bloomberg News.
The measure would effectively require insurers to fully back any crypto holdings with capital, reflecting the regulator’s cautious stance on price volatility and market risk.
Hong Kong Draws Line Between Stablecoins and Unbacked Crypto Assets
Stablecoins would receive differentiated treatment. Risk charges would be tied to the fiat currency backing each token, provided the stablecoin is regulated within Hong Kong’s jurisdiction.
The approach suggests regulators are drawing a clear line between unbacked crypto assets and digital tokens designed to maintain price stability.
The proposal is part of a broader effort to channel insurance capital into assets aligned with government priorities, including infrastructure projects.
While the move opens the door to crypto exposure, the high capital requirements signal that participation would be limited to insurers with strong balance sheets and risk appetite.
The draft framework, dated Dec. 4, remains subject to revision. The Insurance Authority is expected to launch a public consultation between February and April, after which the measures would be submitted for legislative consideration.
In a statement to Bloomberg, the regulator said it began reviewing its risk-based capital regime earlier this year to better support both the insurance sector and Hong Kong’s wider economic development.
The initiative comes as Hong Kong intensifies efforts to position itself as a regional hub for digital assets.
Over the past year, authorities have introduced licensing regimes for virtual asset trading platforms and advanced plans for regulating stablecoin issuers.
Regulators have also moved to expand market access. In November, the Securities and Futures Commission issued circulars aimed at boosting liquidity and broadening product offerings for licensed crypto exchanges, including measures that allow platforms to connect to global liquidity through shared order books.
Together, the proposals highlight Hong Kong’s attempt to balance innovation with financial stability.
Hong Kong to Open Crypto Trading to Global Liquidity
As reported, Hong Kong is preparing a major overhaul of its crypto trading rules, allowing licensed exchanges to connect with global order books for the first time.
The change, announced by SFC Chief Executive Julia Leung during Hong Kong Fintech Week, will end the city’s isolated trading model and align digital asset rules with those used across traditional financial markets.
The move is part of a broader push to strengthen Hong Kong’s role as a regional crypto hub.
Since 2022, the city has introduced exchange licensing, approved Bitcoin and Ether-linked investment products and begun shaping a digital-asset fund ecosystem.
Despite these efforts, Hong Kong’s trading volumes still trail markets like the United States, prompting regulators to refine their approach while maintaining strict investor protections.
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