Hong Kong’s insurance regulator is moving toward a stricter capital framework that would significantly affect how insurers allocate funds to crypto related assets, signaling a more cautious approach as the city expands its digital asset ecosystem. Under a draft proposal, the Hong Kong Insurance Authority is considering applying a 100 percent risk charge to insurers’ direct exposure to cryptocurrencies, effectively requiring firms to hold capital equal to the full value of those assets. The proposal forms part of a broader review of the regulator’s risk based capital regime, which is designed to ensure insurers maintain sufficient buffers against potential losses. While the framework also seeks to encourage investment in government backed infrastructure projects, the treatment of crypto reflects ongoing concerns around volatility, valuation uncertainty, and risk management within insurance balance sheets, particularly as digital assets become more integrated into mainstream financial markets.
The draft rules introduce a more nuanced approach for stablecoins, distinguishing them from other crypto assets. According to the proposal, stablecoin investments would be assessed risk charges aligned with their underlying fiat currencies, provided the tokens are regulated within Hong Kong’s jurisdiction. This suggests that stablecoins meeting local regulatory standards could be treated more like traditional currency exposures rather than speculative assets. The regulator has indicated that the proposal remains subject to revision and will be opened for public consultation between February and April, after which it may be submitted for legislative consideration. Officials have said the ongoing review is intended to balance prudential safeguards with the need to support the insurance sector’s role in broader economic development, particularly as new asset classes and payment technologies gain traction.
The proposed capital treatment comes as Hong Kong continues to position itself as a regional hub for digital assets through a series of regulatory initiatives. Authorities have already introduced licensing regimes for virtual asset trading platforms and stablecoin issuers, aiming to attract institutional participation while maintaining oversight. Recent measures from the city’s securities regulator have also focused on improving liquidity and expanding product offerings for licensed crypto exchanges, including access to global order books. Within this context, the insurance capital review reflects a parallel effort to integrate crypto into established financial sectors without undermining stability. By tightening capital requirements while offering differentiated treatment for regulated stablecoins, the regulator appears to be drawing clearer boundaries around acceptable risk as digital finance becomes more embedded in Hong Kong’s financial system.
