HKMA to Ease Crypto Bank Capital Rules by 2026

- New framework aligns with Basel standards to cut risks on crypto banking. - Part of Hong Kong's drive to cement its position as a global crypto hub. The Hong Kong Monetary Authority (HKMA) has proposed easing capital requirements for financial institutions that handle certain digital assets, a critical move to position Hong Kong as a leading cryptocurrency and blockchain center. The HKMA outlined the proposal in a consultation paper dated September 11, 2025, which introduces a new supervisory policy manual (CRP-1), with changes set to take effect on January 1, 2026. On September 11, 2025, Bloomberg reported that the consultation paper details the HKMA’s approach for categorizing crypto assets under the Basel Committee’s global capital standards. It differentiates between tokenized traditional assets, stablecoins, and unbacked cryptocurrencies like Bitcoin and Ethereum. Currently, Basel rules assign unbacked digital assets a 1,250% risk weight, which effectively requires banks to hold capital equal to the asset's full value. In contrast, the HKMA’s proposed framework includes significantly lower risk weights for qualifying assets that meet specific risk management standards. Notably, cryptocurrencies on permissionless blockchains may benefit from reduced capital requirements if their issuers implement adequate risk mitigation measures. This approach aims to address regulatory concerns without stifling financial innovation, particularly in tokenized products. The proposed measures align with Hong Kong's broader initiative to regulate stablecoin issuers. Since August 1, 2025, rules require issuers pegging stablecoins to the Hong Kong dollar to hold a license. They must also maintain at least HK$25 million in share capital and ensure sufficient liquid assets to cover 12 months of operating expenses. Furthermore, issuers must allow stablecoin holders to redeem assets at par value within one business day. Violating these rules could incur penalties, including fines up to HK$5 million or imprisonment for up to seven years. The HKMA invites feedback on the proposed framework through November 7, 2025, as officials hope the initiative will provide banks with clearer and potentially less costly compliance pathways for engaging with digital assets. This latest move underscores Hong Kong's dual focus on creating a robust regulatory environment while establishing itself as a forward-thinking crypto hub. The proposed January 1, 2026 implementation date highlights the city's urgency to stay competitive on the global financial stage.