 forecasts a rising deficit as it ramps up cryptocurrency oversight, prompting concerns over financial sustainability.){kind=link}
The Hong Kong Securities and Futures Commission (SFC) has projected a widening budget deficit, anticipating a shortfall of $20.5 million (148 million HKD) for the 2024/25 fiscal year, which is expected to grow to $33.06 million (238 million HKD) in 2025/26.
The projection according to press release was outlined in the SFC’s annual budget proposal submitted to the Legislative Council’s Financial Affairs Committee.
The rising deficit stems from increased regulatory expenditures, particularly in the supervision of virtual assets, as Hong Kong continues to strengthen its oversight of the cryptocurrency sector.
Despite financial challenges, the SFC remains committed to enhancing market supervision, aiming to establish a more robust regulatory framework to address emerging risks in the digital asset space.
Strengthening Virtual Asset Oversight Through Workforce Expansion
To bolster its regulatory effectiveness, the SFC plans to create 15 new positions, with eight roles dedicated to virtual asset regulation, market surveillance, and law enforcement.
The remaining seven will focus on IT infrastructure and institutional support, reinforcing the commission’s modernization efforts.
The move aligns with Hong Kong’s broader ambition to position itself as a global leader in cryptocurrency and blockchain regulation.
By expanding its oversight capabilities, the SFC seeks to ensure the security and competitiveness of its financial sector amid the growing prominence of digital assets.
These regulatory developments coincide with Hong Kong’s broader push into the crypto space, as demonstrated by major investments from Enterprise Holdings and increasing adoption of tokenized legal procedures.
Also Read: Hong Kong Securities Regulator Approves 4 Crypto Exchanges Amid Push To Become Crypto Hub
Licensing Fees, Rising Operational Costs, and Revenue Challenges
SFC Chief Executive Officer Leung Fung-yee highlighted the importance of resuming a user-pays model for regulatory fees, ensuring financial sustainability.
However, concerns have been raised regarding the impact of licensing fees on small and medium-sized brokers.
While the annual license fee remains at HK$4,700, it falls short of covering the regulator’s rising operational costs.
The SFC’s total recurrent expenditure for the upcoming fiscal year is projected at HK$2.592 billion, marking a 7.2% increase from the previous year.
The rise is driven by an HK$130 million increase in personnel expenses, including an average salary adjustment of approximately 2.1%.
The financial strain underscores the challenge of maintaining regulatory efficiency while managing rising costs.
Public Criticism and the Broader Economic Context
The SFC’s budget expansion has sparked criticism from members of the Legislative Council, who argue that increased spending is ill-timed given the Hong Kong government’s broader fiscal deficit.
At a time when other public departments are implementing budget cuts, critics believe the SFC should exercise greater financial discipline rather than expanding its workforce.
They call for alternative revenue-generating strategies to offset the budget shortfall rather than relying on increased regulatory spending.
Meanwhile, Hong Kong’s growing embrace of cryptocurrency continues to make headlines, with lawmakers proposing Bitcoin inclusion in fiscal reserves and the legal system introducing tokenized notices for crypto-related legal actions.
These developments highlight the city’s evolving approach to digital assets, even as financial regulators grapple with economic constraints.