Hong Kong is cracking down on crypto again, but this time, they’re casting a much wider net. Now it’s not just exchanges in the crosshairs—dealers, brokers, and custodians are all getting swept into the city’s tougher licensing rules. It’s a big move away from cherry-picking who gets regulated to covering the whole industry, top to bottom.

From now on, if you’re handling crypto trading, custody, or managing client assets in Hong Kong, you need a license from the Securities and Futures Commission (SFC). And it’s not just a formality. Firms need to keep more capital on hand, put stricter controls in place, separate client money from their own, boost cybersecurity, and lay out way more details about what they’re doing. Basically, crypto outfits have to start acting like old-school banks and brokers.

Why? For Hong Kong, it’s pretty simple they want to be a serious, regulated global crypto hub, not some wild west playground. After a string of scandals and high-profile blowups, protecting investors is now the main goal. By bringing dealers and custodians under the regulatory umbrella, the government wants to close the loopholes that left people exposed, even when exchanges had licenses.

This is going to hit the industry unevenly. Big, well-funded firms will probably do fine and might even gain ground as smaller or less prepared rivals struggle with the new costs. Some companies might just pack up and leave. Others will look to merge or team up with those who already have their paperwork in order.

Investors face a choice: more protection, but not as many options. Hong Kong isn’t hiding its approach crypto gets to stick around, but only if it follows the rules. These stricter licensing rules? They’re a gamble on building trust that lasts, not chasing fast profits. Sure, it might rattle the industry for a while, but the city’s clearly in it for the long haul.