Hong Kong's Securities and Futures Commission (SFC) will primarily regulate virtual asset over-the-counter (OTC) trading and custody services, shifting the responsibility from the Customs and Excise Department. This decision follows public consultations and concerns about regulatory arbitrage, as well as the complexity of market operations where OTC services often include custody provisions. Treasury Secretary Paul Hui emphasized the need for centralized regulation to manage these complexities effectively. If banks are involved, the Hong Kong Monetary Authority (HKMA) will act as the front-line regulator. The SFC aims to ensure adequate regulatory resources are available to handle license applications for virtual asset service providers.