Hong Kong’s SFC Tightens Custody Rules for Licensed Crypto Exchanges

The Securities and Futures Commission (SFC) of Hong Kong has announced harsher custody requirements for licensed virtual asset trading platforms (VATPs). This step reinforces the regulatory body’s commitment to securing client assets as part of its broader plans to position Hong Kong as Asia’s primary crypto hub. The new rules outlined new minimum standard for covering four key areas that are senior management accountability, cold wallet operations, third-party wallet service use, and real-time cybersecurity threat monitoring.

The SFC's new rules are meant to fix problems that were found in a targeted review earlier this year. Some exchanges have weak cybersecurity and asset protection measures, according to the assessment.

The regulator made it clear that these guidelines will be the standard for all virtual asset custodians on the market. This shows that investors need to be able to trust that their assets are safe.

The project also fits with the Infrastructure and Safeguards pillars of the SFC's ASPIRe plan, which was announced in February at CoinDesk's Consensus 2025 in Hong Kong. The plan aims to deal with problems like market volatility, regulatory arbitrage, and liquidity fragmentation, while also allowing more regulated goods and services.

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Hong Kong’s approach blends regulatory expansion with tighter controls, setting it apart from Singapore’s more cautious stance on retail crypto services. The city aims to strike a balance between innovation and protecting investor assets by allowing firms chances to grow while also making sure the investments are safe.

This change to the custody rule comes following a number of regulatory changes in 2025 that made oversight more severe and wide-ranging. The SFC started an examination of derivatives and margin trading for virtual assets. After that, the regulatory body set up new licensing rules for trading and custody services in February. It approved staking services for regulated exchanges and funds in April, but only if they followed rigorous rules about keeping assets separate and disclosing risks.

The SFC's most recent actions show that Hong Kong is still committed to building a safe, open, and globally competitive crypto industry, with protecting investors at its core.