Key Takeaways:
- Hong Kong’s SFC has introduced stricter custody rules for licensed virtual asset trading platforms (VATPs) under its “ASPIRe” roadmap.
- These measures are being introduced after the SFC conducted an internal review, where high-profile breaches at overseas platforms resulted in the loss of funds.
- Several strict custody requirements are being introduced, such as cold wallet infrastructure, real-time threat monitoring, senior management accountability, and stringent transaction verification.
Hong Kong’s Securities and Futures Commission (SFC), which regulates Hong Kong’s securities and futures markets, has released new custody requirements for licensed virtual asset trading platforms (VATPs), setting a stricter benchmark for safeguarding client assets amid rising global cybersecurity threats.
Based on the circular issued on Friday, August 15th, the standards form part of the regulator’s “ASPIRe” roadmap and aim to address weaknesses identified in its own targeted review earlier this year. The review, along with a series of high-profile breaches at overseas platforms, revealed deficiencies in wallet infrastructure, transaction verification, and access controls, resulting in significant client losses worldwide.
Under the new framework, licensed VATPs must:
- Provide clients with cold wallet infrastructure
- Maintain real-time threat monitoring and independent third-party assessments
- Hold senior management accountable for custody compliance
- Provide rigorous transaction verification and comprehensive staff training to avoid blind signing
The SFC has also provided examples of good practices to guide implementation. These custody standards will not only apply to existing VATPs but will also serve as core expectations for a forthcoming licensing regime for standalone virtual asset custodians.
“In order for Hong Kong to foster a competitive, sustainable, and trusted digital asset ecosystem, client asset protection must always remain a top priority,” said Dr. Eric Yip, the SFC’s Executive Director of Intermediaries. “Licensed VATPs can leverage the SFC’s practical guide to step up their custody practices, especially amid heightened risks globally.”
The rules take immediate effect and are part of Hong Kong’s broader push to establish itself as a secure, competitive hub for digital assets, following the city’s recent rollout of a stablecoin licensing regime in August.
