Hong Kong regulators have expanded their cooperation on financial reporting and audits to cover licensed crypto firms under a new memorandum of understanding. On Monday, the Securities and Futures Commission (SFC) and the Accounting and Financial Reporting Council (AFRC) announced that the agreement extends their regulatory cooperation to financial and compliance reporting by SFC-licensed virtual asset service providers, licensed corporations, registered open-ended fund companies, and authorized funds.
According to the SFC, the MoU also covers related audit and assurance work and establishes a framework for information sharing, case referrals, mutual assistance, and coordinated inspections and investigations. The agreement replaces a 2021 MoU signed by the SFC and the Financial Reporting Council, which was renamed the AFRC in 2022. SFC Chair Kelvin Wong stated that the expanded cooperation would provide more comprehensive oversight across a broader range of entities and activities in Hong Kong’s financial sector. This development occurs as Hong Kong continues to expand its digital asset regulatory framework, with recent plans for rules covering crypto advisory services and frameworks for virtual asset margin financing and perpetual contracts.
The integration of licensed virtual asset service providers into the existing financial reporting and audit oversight framework signals a maturation of Hong Kong's regulatory stance, moving beyond initial licensing to deep operational scrutiny. By aligning crypto entities with traditional licensed corporations and funds under the same information-sharing and inspection protocols, regulators are effectively treating these digital asset intermediaries as systemic components of the broader financial infrastructure rather than isolated experimental sectors.
This structural alignment reduces regulatory arbitrage opportunities between traditional finance and crypto markets while increasing compliance burdens for VASPs regarding audit quality and transparency. Market participants should observe how this coordinated oversight impacts the speed of enforcement actions and the standardization of financial disclosures, as the shared framework may accelerate the identification of irregularities through cross-agency data flows.
