Hong Kong introduces new asset storage standards for crypto exchanges

What’s new? The Hong Kong Securities and Futures Commission (SFC) has set new asset storage standards for licensed crypto exchanges. The reason for the tightening was an analysis of the platforms, which revealed weaknesses in the security systems of some of them.

Press release

What else is known? According to a statement on August 15, licensed virtual asset trading platforms (VATPs) must critically review their asset storage practices following numerous hacks of overseas exchanges that have resulted in significant losses for customers.

The SFC has established minimum standards covering senior management responsibility, cold wallet operations, the use of third-party custodial solutions, and real-time threat monitoring. The requirements set out in the circular took effect immediately.

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“Going forward, these standards will also form the core expectations for virtual asset custodians, and help foster an effective industry-wide framework for virtual asset custody,” the SFC said.

The SFC’s actions followed a surge in crypto hacks in July: analysts at cybersecurity firm PeckShield estimated losses at $142 million, up 27% from June.

While mainland China maintains a ban on cryptocurrency trading and mining, Hong Kong, as a special administrative region of the PRC, is developing as a regional crypto hub and seeking to attract crypto businesses through a retail exchange licensing system.

A separate licensing regime for stablecoin issuers also came into effect on August 1.

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The expansion of the number of crypto products available on the local market for retail investors, combined with strict asset protection rules, allows Hong Kong to offer better conditions compared to its regional competitor, Singapore, which has taken a stricter stance on retail services.

The new circular is directly linked to the key principles of the SFC’s ASPIRe strategy, presented in February at the CoinDesk Consensus 2025 conference in Hong Kong. It aims to address issues of liquidity fragmentation, regulatory arbitrage, and market volatility, as well as to expand the range of regulated products and services.

Earlier this year, the regulator already took a number of measures aimed at expanding market access and tightening supervision.

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In February, the regulator announced new licensing regimes for over-the-counter trading and custodial services, as well as a review of its approach to derivatives and margin trading in virtual assets.

In April, the SFC allowed licensed exchanges and funds to offer staking services.