No longer just a rumor — Hong Kong is officially pulling OTC crypto trading out of the shadows.
On June 27, Hong Kong’s Financial Services and the Treasury Bureau (FSTB) and Securities and Futures Commission (SFC) jointly released a consultation paper announcing a mandatory licensing regime for all platforms offering crypto-to-fiat services — including OTC shops and platforms.
There’s no grace period:
Platforms without licenses must shut down immediately once the law takes effect. Violators face up to 7 years in prison and a HKD 5 million fine.
Why is OTC suddenly under the spotlight?
OTC trading has long been a convenient entry and exit point for retail users in Hong Kong — fast, cash-based, and largely unregulated. But after the JPEX collapse in 2023, regulators are moving to close the loopholes and clamp down on risk.
Under the proposal, all OTC operators — physical or online — will need to meet stringent compliance requirements, including AML controls, real-time monitoring, cold/hot wallet separation, and customer asset segregation.
This aligns with the upcoming stablecoin licensing regime
In parallel, Hong Kong’s new stablecoin issuer licensing rules will take effect on August 1, 2025. OTC platforms will only be allowed to deal with approved stablecoins — meaning that even licensed OTCs cannot handle USDT or USDC unless those assets are formally authorized.
The bigger picture? Hong Kong is constructing a tightly regulated crypto ecosystem — one where compliance is the cost of entry, and gray zones are being eliminated.
What's the impact on users and OTC operators?
For OTC merchants, this marks a major shake-up. Many small operators will struggle to meet the licensing requirements — including legal, cybersecurity, and audit infrastructure — and may exit the market entirely.
Retail users will also feel short-term friction: the days of casual walk-in cash swaps may be over. Without familiar OTC storefronts, unlicensed alternatives could tempt users — but those routes come with heightened risks.
Going forward, licensed platforms like HashKey Group and OSL are expected to become the primary on- and off-ramps, offering enhanced safety, transparency, and regulatory backing.
An upgrade — or a lockout?
This isn't an abrupt crackdown — it’s the next move in a long-term plan to build Hong Kong into a globally trusted crypto hub. From exchange licenses to stablecoin regulation and now OTC, Hong Kong is steadily shifting from “experimentation” to institutional-grade infrastructure.
The path to a compliant Web3 future is being paved — but will all players be able to walk it?
What do you think:
Will this bring trust and capital — or squeeze out innovation and accessibility?
Read the official consultation paper (gov.hk)：https://www.info.gov.hk/gia/general/202506/27/P2025062700385.htm
