HK Securities Association Head Flags Controversy Over Virtual Asset Brokerage Registration Rules

Chan Chi-wah, president of the Hong Kong Securities and Futures Professionals Association, has publicly challenged a regulatory mechanism that requires brokerages to pre-register designated bank accounts with caps for their clients, arguing that the rule improperly transplants virtual asset regulatory logic onto the traditional securities industry.

Chan’s criticism, reported by PANews citing Orange News on March 21, 2026, targets a specific friction point: a bank account registration mechanism that imposes numerical caps on brokerage client accounts. He contends the approach borrows directly from virtual asset oversight, where pre-approval of blockchain wallet addresses makes sense because verifying on-chain address ownership is inherently difficult.

Traditional securities, Chan argued, already have established identity verification mechanisms. “There is no need for a blanket restriction on the number of accounts,” he said, drawing a clear line between the two regulatory environments.

Why Chan Says Virtual Asset Rules Don’t Fit Traditional Brokerages

The core of Chan’s argument is proportionality. Pre-registration requirements were designed for virtual assets, where pseudonymous blockchain addresses create genuine compliance challenges. Brokerages operating in the traditional securities market already conduct know-your-customer (KYC) checks and maintain identity verification systems that make account-level pre-registration redundant, in his view.

Instead of blanket account restrictions, Chan advocates for risk-based regulatory principles. His recommendations include focusing enforcement resources on detecting abnormal fund flows and “layered transactions,” establishing clearer compliance standards for same-name accounts, and enhancing anti-money laundering (AML) monitoring through big data and artificial intelligence.

He also pointed to international precedent. The European Union’s anti-money laundering framework emphasizes beneficial ownership penetration rather than pre-account registration limits, suggesting Hong Kong’s approach is out of step with peer jurisdictions.

The concern is not hypothetical. The Hong Kong Securities and Futures Commission (SFC) issued a circular in November 2025 specifically urging licensed firms to detect and prevent “layering activities” in money laundering. Chan’s critique suggests that while the SFC’s AML goals are valid, the tools being applied may be mismatched to the risk profile of traditional brokerage operations.

Hong Kong’s Broader Virtual Asset Regulatory Overhaul

Chan’s comments arrive at a pivotal moment for Hong Kong’s financial regulatory landscape. The SFC and the Financial Services and the Treasury Bureau (FSTB) are preparing to introduce new virtual asset dealer and custodian legislation to the Legislative Council in 2026, part of a sweeping framework expansion.

The proposed regime follows a “same business, same risks, same rules” principle, extending requirements that mirror existing securities industry obligations to virtual asset operators. The framework falls under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and would expand oversight to cover VA advisers and managers in addition to dealers and custodians.

The consultation process has drawn significant industry attention, with over 190 responses received by the SFC and FSTB on the proposed dealer and custodian rules. Annual AML training for all SFC-licensed firm staff became mandatory from January 2025, signaling the regulator’s intensifying focus on compliance infrastructure.

Hong Kong’s push is part of a broader strategy to establish itself as Asia’s preferred crypto hub, a positioning effort that has attracted global attention even as tokenized settlement pilots gain traction in the United States. The tension Chan highlights, however, cuts against that ambition: if traditional brokerages face friction from rules designed for a different asset class, the city’s appeal to established financial firms entering crypto may be diminished.

What Comes Next for Brokerages and Crypto Operators

The SFC has not publicly responded to Chan’s criticism. No official guidance document has been identified that specifically mandates the pre-registration mechanism he describes, and the regulatory body has not indicated whether it plans to review or adjust the rule.

For brokerages considering virtual asset services in Hong Kong, the uncertainty creates a practical problem. The legislative timeline for the new VA framework points to 2026 as a decisive year, with LegCo proceedings expected to shape the final licensing requirements. Whether Chan’s concerns gain traction in that process could determine how easily traditional securities firms can expand into digital assets.

The debate also reflects a broader question facing regulators worldwide: as traditional finance and crypto converge, should rules designed for one be applied to the other? Chan’s position is that the answer is no, at least not without significant adaptation. With institutional interest in digital assets continuing to evolve and macro financial conditions adding uncertainty, Hong Kong’s resolution of this regulatory friction will be closely watched across Asia’s financial sector.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.