Hong Kong’s insurance regulator drafts first Asian framework letting insurers hold crypto under a 100% risk charge while stablecoins track fiat-based capital rules.
Summary
- Draft rules let Hong Kong insurers invest in crypto with a 100% capital charge, forcing them to reserve full exposure against volatile assets.
- Stablecoins get separate treatment, with risk charges tied to underlying fiat and Hong Kong’s upcoming 2025 stablecoin licensing regime.
- Move contrasts Singapore, South Korea and Japan, positioning Hong Kong as Asia’s first to codify insurer crypto allocations and ETF-linked exposure.
The Hong Kong Insurance Authority has published draft regulations enabling insurers to invest in cryptocurrencies with a 100 percent risk capital charge, establishing the first explicit framework of its kind in Asia, according to regulatory documents released December 4.
Hong Kong creates new rules around crypto
The proposed rules would require insurers to maintain capital equivalent to their cryptocurrency holdings, reflecting regulatory concerns about volatility and market risks associated with digital assets. Stablecoins would receive separate treatment, with risk charges pegged to their underlying fiat currency for Hong Kong-regulated stablecoins, according to the presentation document.
The Hong Kong insurance market generated approximately HK$635 billion ($82 billion) in gross premiums in 2024, with 158 licensed insurers operating in the jurisdiction. Even limited allocations to cryptocurrencies by these insurers could introduce substantial institutional liquidity to digital asset markets, according to industry analysts.
Bloomberg reported the regulatory proposal, which also addresses infrastructure investments. The framework extends capital incentives to insurers investing in infrastructure projects in Hong Kong and mainland China, particularly Northern Metropolis developments near the border.
The Hong Kong Monetary Authority anticipates issuing initial stablecoin licenses in early 2025. The licensing regime, initiated in August 2024, forms part of the territory’s broader digital asset strategy and aims to establish regulatory clarity for institutional cryptocurrency participation.
The Insurance Authority stated the changes would benefit the insurance sector and overall economy. A public consultation period is scheduled between February and April before legislation is submitted.
Hong Kong’s approach differs from other Asian financial centers. Singapore prohibits cryptocurrency purchases on credit cards and mandates risk awareness tests for retail users. South Korea continues to restrict insurers from directly holding cryptocurrencies despite gradually easing a 2017 ban on institutional crypto participation. Japanese insurance regulations do not currently classify cryptocurrencies as investment assets, though potential reclassification in 2026 could enable institutional products.
Hong Kong approved spot Bitcoin and Ethereum exchange-traded funds earlier in 2024. The Securities and Futures Commission issued circulars in November aimed at increasing liquidity on licensed exchanges by allowing platforms to access global order books.
Industry participants expect large insurers with substantial capital reserves to be early adopters of the framework, while smaller insurers may delay participation until custody and accounting practices are standardized. Operational considerations including asset custody and cybersecurity remain significant factors, according to market observers.
The regulator began examining its risk-based capital regime earlier in 2024. Some insurance companies have lobbied for expansion of allowable asset classes beyond the current options. Market participants are monitoring the consultation process for potential modifications to risk charges.
