HKSFPA Urges Hong Kong to Ease CARF Burdens on Crypto Firms

• HKSFPA calls for adjustments to mitigate legal and operational challenges in CARF.
• Proposed changes include streamlined registration processes and modernized reporting tools.

On January 19, 2026, the Hong Kong Securities & Futures Professionals Association (HKSFPA) called for critical changes to the Crypto Asset Reporting Framework (CARF), warning that the proposed rules could impose excessive legal and administrative burdens on crypto firms. The association submitted an advocacy paper outlining suggested amendments while maintaining support for CARF’s objectives of ensuring transparency and international consistency in crypto transaction reporting.

According to reports from Cryptopolitan, The Cryptonomist, and Cointelegraph, the HKSFPA raised concerns with CARF’s record-keeping obligations, particularly for dissolved companies. While the six-year retention period was deemed reasonable, the association opposed extending liability to individuals, such as directors or officers of defunct businesses. The HKSFPA argued that such measures could lead to indefinite legal risks and compliance challenges. To address this, the association recommended that regulated third-party custodians, such as liquidators, manage legacy records instead.

The advocacy paper also proposed proportionate registration requirements for crypto asset service providers. While supporting mandatory registration to maintain fair competition, the HKSFPA suggested a simplified process for entities with minimal activities. For firms filing “Nil Returns,” the association recommended introducing a "lite" registration system or requiring only an annual declaration to ease administrative burdens.

On the issue of penalties, the HKSFPA urged regulators to adopt an administrative penalty structure rather than criminal enforcement for non-compliance. The association highlighted that “per account” penalties could escalate financial consequences over minor infractions. To mitigate this, the paper proposed capping penalties and establishing a "reasonable excuse defense" for entities that demonstrate good-faith efforts to comply.

In addition, the HKSFPA called for upgrades to CARF’s electronic filing systems, advocating for technologies like Application Programming Interfaces (APIs) and XML file submissions. These tools would streamline and automate reporting tasks, reducing manual errors, particularly for crypto firms dealing with significant transaction volumes.

The HKSFPA emphasized that these revisions would help crypto businesses comply more effectively with CARF regulations while balancing operational efficiency and regulatory demands. By addressing these pain points, the association believes Hong Kong could reinforce its position as a leading hub for crypto innovation.