When large-scale digital assets encounter global regulation: a smarter way to hold is taking shape in Hong Kong

When multi-million-dollar digital assets are no longer just “address balances” in a technical sense, but become financial targets that are transparent, traceable, and auditable by global tax authorities, the underlying logic of holding methods must be fundamentally restructured. Starting January 1, 2026, the “Crypto Asset Reporting Framework” (CARF) will be officially implemented across 48 jurisdictions, including the UK and all EU member states. Led by the Organisation for Economic Co-operation and Development (OECD), this framework explicitly requires “Reportable Crypto Asset Service Providers” (RCASP) to automatically exchange customer transaction data, with a granularity far beyond the “Common Reporting Standard” (CRS), which only reports year-end balances. This means that every on-chain interaction under an individual’s name is becoming unprecedentedly transparent from a regulatory perspective.

In this context, mainstream custodial institutions have set industry standards at the technical level—such as Coinbase Custody and BitGo generally storing the majority of assets offline in cold wallets, and seeking independent audit certifications like SOC 1 Type II and SOC 2 Type II—but their core focus remains on “hacker prevention,” rather than “regulatory compliance.”

The United States’ first federally chartered digital asset bank, Anchorage Digital, although subject to banking-level prudential regulation, has not resolved the core contradiction of directly exposing personal holdings under CARF.

Once large assets need to be converted into fiat currency, traditional banks initiate source of wealth (SOW) reviews under anti-money laundering (AML) rules. Personal accounts lacking legitimate narratives are highly susceptible to freezing or rejection.

The Hong Kong market offers an institutionalized pathway. Based on the Hong Kong Trustee Ordinance (Cap. 29) and confirmed by cases such as CL v HN [2023] HKCFI 1714, cryptocurrencies have been explicitly recognized as property types capable of establishing trusts effectively.

Building on this legal foundation, a structure integrating trust governance and professional custody is taking shape:

Legal Layer: Licensed trust companies such as Hong Kong Trust Capital Management Limited (HKTCM) act as legal trustees, bearing statutory fiduciary duties under the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance;

Technical Layer: Entrusting firms like Global Digital Custody Limited (GDC) serve as technical implementers, responsible for private key generation, cold/hot wallet segregation, and transaction signing. Their operations strictly adhere to the technical and internal control standards set forth in the “Legislative Recommendations on Virtual Asset Custody Services in Hong Kong” jointly issued by the Hong Kong Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) in 2025, fully aligning with the definition of “Qualified Custody Services” in the “Hong Kong Digital Asset Development Declaration 2.0.”

This “legal + technical” dual-structure brings three substantial changes:

• Identity Isolation: After assets are injected into the trust following KYC and AML verification, ownership is legally attributed to the trustee, effectively isolating it from the trustee’s personal property. In the CARF reporting chain, the trust can serve as an independent compliant entity to participate in information reporting, avoiding direct linkage of personal tax identities to high-frequency trading activities.

• Trustworthy Withdrawals: When trust assets are to be liquidated, the funds flow through the trust structure rather than large personal transfers without background. This pathway has been validated for compliance by multiple local licensed banks, creating an auditable, explainable, and repeatable large withdrawal channel for high-net-worth clients.

• Security Enhancement: GDC’s technical operations are not mere commercial promises but are performed as contractual obligations under the trust legal framework.

Of course, such architectures have clear entry thresholds, typically targeting holders with assets exceeding one million USD. Their value lies not in short-term trading convenience but in providing a long-term institutional foundation for digital wealth—under macro trends such as OECD’s push for global tax transparency, the EU’s comprehensive implementation of the Markets in Crypto-Assets Regulation (MiCA), and the US Federal Reserve and Office of the Comptroller of the Currency (OCC) continuously refining custody guidelines. The future fate of assets fundamentally depends on the legal and regulatory environment embedded within them. Hong Kong’s “trust-custody” integrated model, leveraging the certainty of common law, the foresight of local regulation, and the reliability of professional technology, constructs a compliant container capable of withstanding cross-border scrutiny, the test of time, and intergenerational transfer for high-net-worth digital assets.