Hong Kong SFC Enhances Virtual Asset Custody Standards

Hong Kong SFC Revises Custody Standards

The Hong Kong Securities and Futures Commission has issued new guidance for virtual asset trading platforms, primarily aimed at enhancing custody standards, following a global trend towards regulated digital asset frameworks.

The guidance reflects a push for sustainable digital asset ecosystems, impacting market liquidity and regulatory stability by promoting secure custodial and staking services.

The Hong Kong Securities and Futures Commission (SFC) has released new guidelines to improve custody standards on virtual asset trading platforms. This step aligns with the sector’s ASPIRe roadmap to bolster the digital asset ecosystem. The guidance reflects heightened global risks.

The updated regulations involve the Hong Kong SFC and the Hong Kong Monetary Authority . Both entities are synchronizing efforts to enable compliant custodial and staking operations. Dr. Eric Yip emphasized the importance of client asset protection.

The revised guidance impacts authorized institutions, allowing regulated staking of major cryptocurrencies like ETH and BTC. This change is poised to support liquidity boosts and increase participation in staking activities through regulated platforms.

Financially, the move positions Hong Kong as a more appealing hub for digital asset activity. Politically, it underscores a strong regulatory framework, prompting further integration of regulated staking and custody practices in the financial sector.

The regulatory update might encourage increased developer activity and platform security. Technologically, it suggests a shift towards dynamic custody solutions, replacing cold storage mandates. Historical precedents show previous rule revisions have led to similar enhancements in digital asset handling.

The SFC’s actions may lead to notable shifts in global virtual asset regulatory strategies. Data suggests positive outcomes for institutional involvement in staking-related activities, with clear support from revised SFC circulars and the overarching ASPIRe objectives.

Dr Eric Yip, Executive Director of Intermediaries, Hong Kong SFC, said, “In order for Hong Kong to foster a competitive, sustainable and trusted digital asset ecosystem, client asset protection must always remain a top priority for all licensed VATPs, which can leverage the SFC’s practical guide to step up their custody practices especially amid heightened risks globally.”