The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have issued comprehensive updates covering virtual asset financing, custody, and stablecoin dealing.
According to joint circulars from the regulators, licensed institutions can provide virtual asset financing to securities margin clients based on their financial capability.
Eligible collateral is strictly limited to bitcoin, ether, and HKMA-licensed stablecoins. These assets are subject to prudent haircuts, set at a minimum of 60% for both bitcoin and ether.
Brokers may also provide retail clients with access to global shared order books for agency trading, provided they explicitly explain the associated risks.
Regulators require robust security measures, including system authentication and strict withdrawal limits, to safeguard client funds against fraudulent withdrawals.
Custody and cold storage mandates
A separate guidance, which supersedes previous standards from February 2024, details strict requirements for digital asset custody.
Authorised institutions are now required to store 98% of client virtual assets in cold storage.
The rules mandate generating private keys offline using Hardware Security Modules (HSMs). Institutions must also implement multi-factor authentication and utilise key sharding to prevent a single point of failure.
Regulators also require the comprehensive segregation of client assets from an institution’s own holdings. Strict due diligence must be exercised when outsourcing custody.
Institutions must discuss their intentions with the HKMA and demonstrate full compliance before engaging in any digital asset custodial activities.
Risk-proportionate rules for stablecoin dealing
Following the Stablecoins Ordinance that took effect on August 1 2025, regulators have adopted a risk-proportionate approach to specific dealing requirements.
Because licensed stablecoins carry a lower risk profile, institutions can offer stablecoin-only dealing services without registering for Type 1 securities dealing activities.
For clients exclusively trading stablecoins, the mandatory virtual asset knowledge tests and exposure limits do not apply.
Furthermore, relevant stablecoin products are not automatically classified as complex instruments restricted solely to professional investors.
However, authorised institutions intending to offer dealing, advisory, or portfolio management services involving licensed stablecoins must consult the regulator prior to launch.
Featured image credit: Edited by Fintech News Hong Kong, based on image by user6699736 via Magnific
