The Hong Kong Securities & Futures Professionals Association (HKSFPA) has recommended the city's crypto firms set up a self-regulatory committee and monitor one another for compliance. 

“The Hong Kong financial market industry is too focused on supervision,” said the HKSFPA in an April 22 recommendation letter, “but there is no organization to maintain the overall development of the industry."

The administrative body then noted the need for Hong Kong to stay competitive in the global securities market and “consolidate its status as an international financial center.” In outlining the next steps, the HKSFPA recommended the city’s regulator, the Securities & Futures Commission (SFC), establish "statutory self-regulating” and autonomous bodies that would instead delegate licensing powers to industry players: 

"In the case of Hong Kong, the Commission recommends that the Securities and Futures Commission still retains the power to supervise market conduct, but splits the licensing power to solely the securities industry, A self-regulatory institution composed of the futures industry, asset management industry and virtual asset industry."

As per a similar recommendation letter last August, the HKSFPA spoke of a “balanced supervision and development" that prevents the Hong Kong virtual assets industry "from going to the extreme direction of supervision."

That said, self-regulation doesn't always come with a balanced risk-reward dynamic. 

For one, Lithuania is tightening its crypto regulations starting in 2025 after reports of compliance failures and embezzlement. The Baltic nation has issued licenses to more than 580 crypto firms and currently maintains little oversight from its licensees. 

However, Hong Kong regulators have been much more tolerant of virtual asset firms than their counterparts in other parts of the world. 

On April 15, the SFC approved spot Bitcoin and Ether exchange-traded funds for issuers, including Harvest Fund Management, Bosera Asset Management, and China Asset Management (ChinaAMC). Last year, the regulator issued official virtual asset licenses to crypto exchanges Hashkey and OSL. 

Meanwhile, the U.S. Securities and Exchange Commission has not yet approved a spot Ether ETF or offered specific licenses for crypto exchanges to register. In addition, the outlook for their approvals currently remains grim.  

Related: Hong Kong investment firm Victory Securities reveals Bitcoin and Ether ETF fees