The Hong Kong Securities and Futures Commission (SFC) has introduced new rules to protect users’ digital assets on licensed virtual asset trading platforms. This comes after a recent review found weaknesses in security and internal controls at some operators.
The SFC’s decision comes as recent incidents in the crypto industry uncovered flaws in wallet management and access controls. The new rules now outline minimum standards and examples of best practices for operators.
As noted in the official circular, these standards fall under the SFC’s ASPIRe plan, which is designed to strengthen and improve Hong Kong’s virtual asset sector. The amendments also suggest that senior management is expected to take full responsibility for any issues while ensuring compliance with these rules.
Requirements for Licensed Platforms
According to SFC, crypto platforms must maintain clear policies and recruit qualified personnel capable of managing risks. Custody systems, including cold wallets, must be secure, with private keys and cryptographic seeds safely generated, stored, and backed up. Platforms should also verify third-party providers and use secure hardware devices.
Additionally, all the wallet operations must be carefully managed. For instance, transactions need independent checks to prevent unauthorized transfers as well as approval devices should be isolated and monitored.
Furthermore, any transaction requiring manual review must clearly show all details so signers can confirm accurately. Whitelists should control fund destinations, and changes must be strictly supervised. End-to-end checks should compare intended transactions with signed ones before sending them to the blockchain.
Changes Takes Place Effective Immediately
The release states that these rules take effect immediately. Licensed virtual asset trading platforms must review their custody processes and ensure full compliance. Meeting these standards will also form part of annual external compliance checks and technology assessments.
“In order for Hong Kong to foster a competitive, sustainable and trusted digital asset ecosystem, client asset protection must always remain a top priority for all licensed VATPs, which can leverage the SFC’s practical guide to step up their custody practices especially amid heightened risks globally.” said Dr Eric Yip, the SFC’s Executive Director of Intermediaries.
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