This move follows the SFC’s earlier reviews this year, which revealed weak control mechanisms at some crypto platforms, and aims to raise security awareness across the industry.

Access Controls Become Mandatory

Hong Kong SFC’s new regulations require licensed crypto trading platforms to establish robust wallet infrastructure and implement strict access controls to protect user assets.

Platforms will not only be responsible for securely storing users’ funds but also for creating transparent and auditable mechanisms in their transaction processes and governance structures.

These changes provide an additional layer of security against potential cyberattacks while aiming to boost investor confidence in fund protection. Through this, the SFC seeks to strengthen operational resilience in Hong Kong’s digital asset ecosystem and promote alignment with global standards.

Response to Custody Failures

Under the “Protection” pillar of its ASPIRe roadmap, the SFC has drawn important lessons from targeted reviews conducted to identify gaps in the industry. Additionally, high-profile custody failures and wallet security issues at overseas platforms have prompted the SFC to strengthen its regulatory approach. These measures aim to ensure the secure storage and management of digital assets while minimizing risks for investors.

Real-Time Monitoring

The new standards clearly define senior executives’ responsibilities in protecting customer funds. In addition, secure cold wallet operations, third-party wallet oversight, and real-time threat monitoring systems are made mandatory for platforms.

Through these measures, the SFC aims to ensure that Hong Kong’s digital asset sector develops on a sustainable, reliable, and investor-friendly foundation. Dr. Eric Yip, Executive Director of Intermediaries at the SFC, emphasized the importance of the standard, stating: “The protection of customer assets must always remain the top priority for licensed platforms, especially given the global risks facing the industry.”

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HashKey, which became the second exchange to receive a crypto license from the SFC in November 2022, reported that the fraudulent websites made slight alterations to official links to mislead users. The company emphasized in a statement that it has no connection to these fraudulent websites.

SFC Continues to Track Crypto Scams

Since November 2021, Hong Kong SFC has been monitoring fraudulent crypto platforms, fake websites, and unlicensed exchanges. As of January 29, 2025, at least 91 suspicious trading platforms and links have been identified.

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One of the biggest fraud cases in Hong Kong, the JPEX scandal, involved a 1.3 billion Hong Kong dollar (approximately 166 million USD) fraud affecting 2,000 investors. Despite SFC publicly warning that JPEX was operating without a license, the platform falsely claimed otherwise. This incident has been compared to an “FTX moment” for Hong Kong.

Hong Kong Accelerates Crypto Regulations

Until the last quarter of 2024, HashKey and OSL were the only two officially licensed crypto exchanges under Hong Kong SFC. However, as of 2024, the regulator has ramped up its licensing approvals, adding YAX and PantherTrade to its list on January 27, bringing the total number of licensed exchanges to nine. These approvals mark the first batch of crypto licenses in 2025.

Hong Kong is positioning itself as a regional digital asset hub, competing with Singapore. While Singapore has granted at least 30 full licenses to crypto firms, Hong Kong has taken the lead in approving spot Bitcoin BTC and Ethereum ETH ETFs. Singapore Exchange CEO Loh Boon Chye recently stated that the Singaporean market is not yet ready for such financial instruments.

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Julia Leung, CEO of the Hong Kong Securities and Futures Commission, stated that bitcoin has clearly demonstrated its staying power as an alternative asset.

Most central bankers and economists would say virtual assets like bitcoin and ether have no inherent value, Leung said in a speech at the Greenwich Economic Forum Hong Kong on Wednesday.

“I disagree. While the intrinsic value debate continues, it is a fact that 15 years later Bitcoin has gone through many boom and bust cycles and has clearly demonstrated its staying power as an alternative asset,” Leung said. “More clearly, its core technology — DLT — is here to stay.”

Leung’s comments on bitcoin come as the SFC officially introduced a requirement for crypto trading platforms to obtain a license to serve retail investors in Hong Kong.

Hong Kong lawmaker Duncan Chiu has expressed concerns about “overly stringent” regulations for licensing crypto exchanges, criticizing that these rules prevent major global exchanges from entering Hong Kong and reduce market confidence.

In his speech, Leung stated that support for the Web3 ecosystem in Hong Kong “should not be taken as an endorsement of the VA asset class.”

“As things stand, VAs are known for their highly speculative nature and extreme price volatility,” Leung added. “Therefore, we have ensured that extensive security measures are in place to protect investors while meeting their demands.”

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