Hong Kong's new encryption regulations have arrived, detailing CRP-1 and its impact on the market.

Written by: Xiao Za Legal Team

Driven by the wave of technological innovation, the global cryptocurrency asset market has rapidly expanded, while a series of risk issues such as severe price fluctuations and money laundering have also emerged, making the demand for effective regulation particularly urgent. In September 2025, the Hong Kong Monetary Authority (HKMA) issued a consultation draft for the new module CRP-1 “Classification of Crypto Assets” in the “Banking Supervision Policy Manual” (SPM) to the local banking sector, aiming to align with international regulatory standards. By establishing a regulatory framework that balances innovative development and risk prevention, it seeks to provide clear guidance for the banking sector's participation in crypto asset-related businesses.

Next, the Sa Jie team will take a closer look at the new requirements of CRP-1, compare it with the regulatory policies of other countries and regions, and discuss how these changes will impact us in the crypto community.

01 Interpretation of the Core Content of the New Regulations CRP-1 in Hong Kong

(1) Basic Definition: Scope of Regulation and Applicable Subjects

The new CRP-1 regulations first clearly define the scope of cryptocurrency asset regulation, laying a solid foundation for subsequent implementation. Specifically, the new regulations define cryptocurrency assets as: primarily relying on cryptography and distributed ledger technology (DLT) or similar technologies; usable for payment or investment purposes, or for acquiring goods or services. However, it explicitly states that central bank-issued digital currencies are not included in this scope, which allows for a precise definition of cryptocurrency assets while distinguishing them from legal digital currencies, preventing overly broad regulation.

The new regulations target all licensed financial institutions in Hong Kong, such as regular banks, restricted license banks, and companies that accept deposits. These institutions are an important part of the Hong Kong financial system, and the cryptocurrency activities they engage in directly affect financial stability. By bringing them under regulation, risks can be controlled at the source.

In terms of risk management, the new regulations adopt a “no one left behind” strategy. Regardless of whether it is the bank's own held crypto assets, the risks arising from helping clients store and trade crypto assets, or the risks brought about by indirectly engaging with crypto assets through financial derivatives, all must be managed. As a result, financial institutions cannot find loopholes to evade regulation, and all risks related to crypto assets can be strictly managed.

(II) Core Classification

Risk classification is the core logic of the new CRP-1 regulations. The regulations divide crypto assets into Group 1 (low risk) and Group 2 (high risk) based on their risk mitigation capabilities. Through the table below, friends can easily see its core classification.

02 CRP-1 and the Alignment and Differences with International Standards (BCBS Standards)

(1) Core Logic of BCBS Standards

The Basel Committee on Banking Supervision (BCBS) serves as the core institution for global banking regulation. In December 2022, it released the “Prudent Treatment of Crypto-Asset Risk Exposures” and will launch the “Revised Crypto-Asset Standards” in July 2024, establishing a globally unified regulatory framework for crypto assets. Its core logic can be summarized as “risk grading and prudent management.”

In terms of regulatory objectives, the BCBS standards focus on “controlling risks associated with crypto assets and ensuring the capital adequacy of banks,” aiming to prevent the transmission of crypto asset risks to the traditional banking system and to maintain global financial stability. In the core framework, the BCBS categorizes crypto assets into “Group 1” and “Group 2” based on risk, setting strict capital requirements for high-risk assets while promoting global regulatory coordination to avoid regulatory arbitrage.

The introduction of the BCBS standards stems from the rapid development and accumulation of risks in the global crypto asset market. It aims to provide a unified regulatory benchmark for internationally active banks, balancing “financial stability” and “responsible innovation,” and offering a reference framework for regulatory authorities in various countries.

(2) The connection between CRP-1 and BCBS

The CRP-1 new regulations and BCBS standards share similar ideas in many key areas, demonstrating Hong Kong's attitude of keeping pace with global regulatory developments as an international financial center.

From the perspective of asset classification, CRP-1 divides crypto assets into “Group 1” and “Group 2”, while BCBS categorizes them as “Group 1” and “Group 2”. The core standard for their classification is the ability to control asset risk. For example, compliant stablecoins, which are lower-risk and relatively reliable assets, are classified as “Group 1” by BCBS and correspond to “Group 1” in CRP-1. Both require that such assets have clear legal regulations and effective risk prevention measures. For high-risk assets, both sides impose strict regulations on how much capital financial institutions must prepare to control risks, fully reflecting the principle that “the greater the risk, the stricter the regulation.”

In terms of capital regulation requirements, CRP-1 essentially continues the cautious management approach of BCBS. BCBS stipulates that for certain high-risk crypto assets, financial institutions need to hold capital equivalent to 1250% of the asset value to mitigate risks, and CRP-1 applies this standard to “Group 2b” assets as well; for liquid crypto assets, BCBS requires that they must be traded on compliant exchanges and meet certain market size criteria, and CRP-1 has similar requirements for “Group 2a” assets, mandating that they be traded on regulated exchanges while also setting market capitalization and trading volume thresholds to ensure that the invested capital matches the asset risk.

In addition, both CRP-1 and BCBS emphasize the need for comprehensive regulation, whether it is the crypto assets held by banks themselves, the assets involved in services provided to clients, or even the risks associated indirectly, all must be included in the regulatory scope to avoid the emergence of unregulated “grey areas” and to achieve the goal of global unified regulation.

03 CRP-1 New Regulations on the Specific Impact on Cryptocurrency Asset Users

After the implementation of the new CRP-1 regulations, there will be significant adjustments in the banking cryptocurrency business, directly impacting our old friends' buying, selling, and custody of cryptocurrency assets, as well as various related issues.

First, let’s talk about trading options. The new regulations have “tightened” the assets and channels available for trading. High-risk 2b class assets, such as certain NFTs and governance tokens, are no longer allowed for trading by banks, forcing people to use other platforms that may not be very reliable; while 1 class compliant assets are safer, the variety available has decreased; 2a class assets must be traded on licensed exchanges, with stricter account opening reviews and higher thresholds. Now, regarding asset security, the new regulations indeed make asset custody safer, ensuring that even if a platform encounters issues, funds can be prioritized for recovery. However, the anti-money laundering requirements are too strict, reducing personal privacy space, and the price fluctuations of different assets have also varied.

For friends holding 2b category NFTs and governance tokens, the Sa Jie team recommends prioritizing platforms regulated by the Hong Kong Monetary Authority or those with international compliance qualifications, and not to put all assets in one place; users who prefer 1 category compliant assets can enjoy the safety of banks, but must accept that there are fewer things to buy; friends trading 2a category assets should remember to prepare their full set of materials in advance, such as ID cards and bank cards, to cope with the strict review of exchanges. No matter which type of asset you hold, you need to replan your investment portfolio, pay attention to changes in bank fees, and find a balance between enjoying the security brought by new regulations and protecting privacy and operational convenience.

Written at the end

In summary, it can be seen that the new regulations CRP-1 in Hong Kong demonstrate significant foresight in the field of cryptocurrency asset regulation, providing new ideas and directions for industry development and risk prevention.

Sister Sa realized that the regulation of cryptocurrency assets in Hong Kong will enter a stage of dynamic optimization and deepening practice. In the future, regulatory agencies need to keep pace with international trends and strengthen the coordination of cross-border rules; industry participants should establish a normalized compliance communication mechanism. We look forward to Hong Kong taking CRP-1 as an opportunity to improve regulatory technology, balance investor protection and innovation, and set a global regulatory benchmark.