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How Hong Kong’s Updated Crypto Rules Impact Licensed Trading Platforms
Hong Kong’s financial regulator, the Securities and Futures Commission (SFC), has introduced new guidelines to strengthen how licensed crypto trading platforms safeguard client assets. This move is part of Hong Kong’s plan to develop a more secure crypto asset infrastructure.
Why the New Rules?
The SFC’s decision follows several global crypto incidents that exposed weak custody practices, causing significant client losses. Earlier this year, the SFC also found cybersecurity weaknesses during targeted reviews of licensed virtual asset trading platforms (VATPs).
What Are the New Expectations?
The SFC’s new circular outlines clear standards for:
- Responsibilities of senior management
- Use of cold wallets to store assets securely offline
- Oversight of third-party wallets
- Real-time monitoring of cybersecurity threats
These requirements take effect immediately and are designed to raise the bar for virtual asset custody across the industry.
Impact on the Market
Experts believe these tighter rules will encourage the market to consolidate around larger operators with the resources and expertise to comply. Alessio Quaglini, co-founder of crypto custodian Hex Trust, said this will make advanced custody solutions more feasible and reliable for clients.
Context: Hong Kong vs Mainland China
While mainland China continues to ban crypto trading and mining, Hong Kong is taking a different approach by building a regulated framework to attract crypto businesses. This includes licensing for exchanges and, as of August 1, a new licensing regime for stablecoin issuers.
