Hong Kong regulator tightens custody standards for crypto exchanges amid rising global risks
Quick Take Hong Kong’s Securities and Futures Commission said licensed VATPs should critically review their custody practices following multiple overseas incidents. The new standards cover senior management responsibilities, cold wallet infrastructure, third-party wallet oversight and real-time threat monitoring.
Hong Kong's financial regulator has issued new guidance requiring licensed crypto trading platforms to strengthen custody practices for client assets as part of the region's roadmap for advancing crypto asset infrastructure.
In a Friday statement , the Securities and Futures Commission (SFC) said licensed "virtual asset trading platforms" (VATPs) should critically review their custody practices following multiple overseas incidents that exposed vulnerabilities and led to significant client losses. A targeted review by the SFC earlier this year also found shortcomings in some VATPs' controls against cybersecurity threats.
The SFC detailed its new expectations in a separate circular , covering senior management responsibilities, cold wallet infrastructure, third-party wallet oversight and real-time threat monitoring.
"Going forward, these standards will also form the core expectations for virtual asset custodians, and help foster an effective industry-wide framework for virtual asset custody," the SFC said, adding that the requirements outlined in the circular take immediate effect.
"This will likely concentrate the market around operators with the scale and expertise to meet them, making advanced custody setups more viable," Alessio Quaglini, co-founder of Hong Kong-based crypto custodian Hex Trust, told The Block.
The SFC's move follows a surge in crypto security breaches in July, with PeckShield estimating hack-related losses at $142 million — up 27% from June.
While Beijing maintains its ban on crypto trading and mining in mainland China, Hong Kong has moved in the opposite direction, aiming to attract crypto businesses through a licensing framework for exchanges. A separate licensing regime for stablecoin issuers also took effect on Aug. 1.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Musk on chip production: China's large-scale manufacturing capacity often exceeds the sum of all other regions worldwide
After ChangXin Memory Technologies announced a key breakthrough in DDR5 server memory, the Philadelphia Semiconductor Index in the US stock market fell 2.7% overnight, with shares such as Micron and SK Hynix ADR dropping collectively. Musk commented on this trend, saying that when China figures out the manufacturing method of a product, its ability to scale production often exceeds that of the rest of the world combined, and stated that "China seems to be rapidly conquering" general standard specifications such as LP5 and LP6.
IREN reports $702.6 million net loss despite $4 billion in AI cloud contracts
The current AI frenzy: featuring both "Tech and Internet" and "Real Estate" bubble characteristics, reminiscent of the 2008 global capital cycle
This wave of the AI boom exhibits dual characteristics: On a micro level, the heavy-asset nature of AI data centers is driving the industry toward "real estate-like" debt financing models, such as corporate bonds, private credit, and computing power ABS. On a macro level, nearly $2 trillion in overseas excess savings is flowing into core AI assets in the U.S. stock market through private institutions, reconstructing a transnational capital cycle reminiscent of the period before the 2008 subprime mortgage crisis. With nearly $3 trillion in off-balance sheet debt and rising interest rates, the industry is facing an impending major liquidity test.
AI Trading Faces a "Vulnerable Moment"! Japan and South Korea Stock Markets Experience "Black Tuesday" as SK Hynix, Samsung, and SoftBank Plunge Together
On Tuesday, Asian tech stocks faced a new round of systemic sell-off as the overnight weakness in the US semiconductor sector spread to the Asia-Pacific market. Concerns intensified over increasingly fierce competition due to the technological breakthrough by Chinese memory chip manufacturer ChangXin Memory Technologies, as well as worries about the returns on AI capital expenditure and the overall financing environment.
Crypto prices
More
