The Securities and Futures Commission (SFC) in Hong Kong has outlined strict custody expectations for all licensed virtual asset trading platforms (VATPs) in the region.
By Godfrey Benjamin
Editor Julia Sakovich
Updated
3 mins read
Hong Kong markets regulator, the Securities and Futures Commission (SFC), has outlined strict expectations for all licensed virtual asset trading platforms (VATPs) in the region. The goal is to ensure the robust custody of client virtual assets, in order to lay a solid foundation for the crypto industry’s transition to more advanced technologies under the “ASPIRe” roadmap.
The stricter custody expectations of the SFC have been sent out to licensed virtual asset trading platforms. It will serve as the baseline for an incoming licensing regime that would cover virtual asset custodians that stand alone.
Noteworthy, the regulator claims that this rule was curated for the protection of crypto users and their assets.
Ultimately, it is meant to place Hong Kong in a position where it fosters a “competitive, sustainable and trusted digital asset ecosystem,” according to Dr. Eric Yip, the commission’s executive director of intermediaries. The SFC took notice of the increase in “multiple cybersecurity incidents” at overseas centralized platforms, which have caused significant losses to clients.
Most of these incidents were a result of wallet-system vulnerabilities and weak associated controls. It is with these shortcomings in mind that the agency took the initiative to come up with the custody expectations. To specifically tackle these issues, the new rule highlights the need for robust cold-wallet infrastructure and operations and oversight of third-party wallet providers.
Also, it requires controls for private keys and comparable credentials, air-gapped hardware, systematic transaction verification, strict address whitelisting, independent third-party assessments, and staff training to prevent blind signing.
This rule also mandates operators to run round-the-clock security monitoring. This should be done with the same bar expected to anchor the planned custodian licensing regime.
Before this time, Hong Kong’s SFC had a pending proposal that required anyone engaged in safekeeping clients’ virtual assets to get licensed.
In Q1 2025, the top financial regulator introduced a plan with 12 steps to improve security, attract more investors, and help Traditional Finance (TradFi) use blockchain while keeping investors safe.
Like the latest development, the goal of the 12-step plan is to make Hong Kong a leader in the crypto industry while keeping investors safe. As part of the plan, the SFC introduced licenses for over-the-counter (OTC) crypto trading and custody services.
In May 2025, the Hong Kong Legislative Council passed the “Stablecoins Bill” in its third reading. This was a day after the US stablecoin bill, known as the GENIUS Act, advanced to the Senate for approval.
The Hong Kong stablecoin bill is a significant milestone for the Asian country as it allows major institutions to apply for stablecoin issuance licenses from the Hong Kong Monetary Authority (HKMA) by the end of the year.
Backed by the new framework, firms are permitted to introduce Hong Kong stablecoins backed by fiat currency, ensuring strong regulatory standards and market confidence.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
