Hong Kong Tightens Financial Rules for Licensed Crypto Firms

Hong Kong’s financial watchdogs, the Securities and Futures Commission (SFC) and the Accounting and Financial Reporting Council (AFRC), have signed a new Memorandum of Understanding (MoU) to strengthen financial reporting and audit checks for licensed crypto firms.

The move will help regulators review financial records, share information, and spot risks early before they become bigger problems.

New Agreement Brings Crypto Firms Under Closer Checks

The newly active MoU directly replaces the 2021 agreement and brings licensed crypto firms under Hong Kong’s regular financial checks.

The rules mandate that crypto firms holding an SFC license must subject their corporate balance sheets, proof-of-reserves, and client-asset custody logs to meticulous third-party assurance work. 

It also covers the audit and assurance work their auditors carry out.

Meanwhile, the tighter rules could increase compliance costs for smaller crypto firms because they may need stronger accounting systems and more audit support.

At the same time, closer checks could give investors more information about the financial position of licensed firms.

Regulators Can Now Share Information and Investigate Together

The MoU goes beyond basic guidance and sets up a stronger system for joint supervision. The SFC and AFRC will work more closely to monitor licensed crypto firms and respond to possible risks.