Hong Kong’s insurance regulator is preparing a new framework that would sharply raise capital requirements for crypto assets while offering incentives for infrastructure investments, according to details circulated to the industry in early December. The proposals form part of a broader review of the city’s risk based capital system and come as Hong Kong continues to position itself as a regulated hub for digital assets and long term regional financing. If adopted, the changes would directly affect how insurers allocate capital to crypto, stablecoins, and large scale development projects linked to the city and mainland China. Crypto Assets Face Full Capital Charge Under the proposal , the Hong Kong Insurance Authority plans to apply a 100% risk charge on insurers’ direct cryptocurrency holdings, meaning firms would need to fully back those exposures with capital. As a result, unbacked cryptocurrencies would be treated as the highest risk assets on insurers’ balance sheets. This approach reflects long standing regulatory concerns about price volatility, liquidity risk, and valuation uncertainty in crypto markets. However, the framework draws a distinction between cryptocurrencies and stablecoins. Stablecoin exposures would not automatically receive the same treatment. Instead, the capital charge would depend on the strength and structure of the fiat currency peg, as well as whether the stablecoin is issued under a Hong Kong regulatory regime. The Insurance Authority has indicated it will seek industry feedback before finalizing the rules. A public consultation is expected to run from February through April 2026, after which the regulator plans to submit the package for legislative review. Infrastructure Investments Get Preferential Treatment At the same time, the proposal introduces capital incentives for infrastructure investments, signaling a policy shift aimed at channeling long term insurance capital into development projects. The framework would allow insurers to benefit from lower capital charges when investing in qualifying infrastructure assets, particularly those linked to Hong Kong or mainland China or projects issued or listed in Hong Kong. Examples highlighted in the regulator’s materials include large scale urban development and transport projects, such as Hong Kong’s Northern Metropolis plan near the mainland border. The project is a cornerstone of the city’s long term economic strategy and aims to deepen integration with the Greater Bay Area. Historically, Hong Kong insurers have held significant exposure to real estate and fixed income assets. By adjusting capital treatment, regulators appear to be steering insurers toward longer duration assets that align with policy priorities while maintaining prudential safeguards. Part of a Broader Digital Asset Push The insurance proposals arrive alongside wider regulatory moves across Hong Kong’s financial system. Authorities have gradually rolled out licensing regimes for crypto exchanges, custody providers, and tokenized products. In parallel, the Hong Kong Monetary Authority is expected to approve the city’s first group of regulated stablecoin issuers in the coming year, according to market expectations reported by Bloomberg . Taken together, the measures suggest a coordinated effort to separate high risk crypto exposure from regulated financial activity, while still supporting tokenized finance under strict rules. For insurers, the outcome could reshape asset allocation decisions, making speculative crypto holdings more costly while improving the appeal of infrastructure tied to Hong Kong’s long term development strategy.
