Hong Kong Tightens Crypto Custody Rules for Exchanges

Hong Kong's SFC Sets New Crypto Custody Standards

Hong Kong’s Securities and Futures Commission (SFC) has released a circular outlining updated minimum standards and best practices for licensed virtual asset trading platforms (VATPs) to enhance the safeguarding of client digital assets.

Key Takeaways

• Hong Kong’s SFC has introduced new standards to enhance the custody of virtual assets for licensed trading platforms.
• The guidance mandates stronger wallet infrastructure, access controls, and management oversight to address global security risks.

The new measures, which fall under the “Safeguard” pillar of the SFC’s ASPIRe roadmap, are a direct response to findings from a targeted review by the regulator, coupled with a series of custody failures observed on international platforms. These incidents highlighted critical weaknesses in essential areas such as wallet infrastructure, transaction verification processes, and access controls.

The SFC aims to enhance custody resilience across the industry and ensure the sustainable development of Hong Kong’s virtual asset sector by defining clear expectations for senior management accountability, secure cold wallet operations, third-party wallet oversight, and real-time threat monitoring.

“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.

These regulatory updates highlight the increasing importance of secure crypto custody solutions. For platforms launching new tokens or managing digital assets, a robust security framework is paramount. Codeum provides smart contract audits and security consulting to help ensure the safety of digital assets.