Hong Kong’s Securities and Futures Commission (SFC) has issued fresh guidance urging licensed crypto trading platforms to tighten custody measures for client assets, as part of the city’s broader plan to enhance its virtual asset infrastructure.
In a statement on Friday, the regulator said licensed “virtual asset trading platforms” (VATPs) should conduct a thorough review of their custody arrangements, citing recent overseas incidents that exposed weaknesses and resulted in major client losses. The SFC added that its own targeted review earlier this year uncovered gaps in some VATPs’ defenses against cybersecurity risks.
In a separate circular, the SFC outlined its updated expectations, which include clearer responsibilities for senior management, stronger cold wallet infrastructure, tighter oversight of third-party wallets, and real-time threat monitoring.
“These standards will now serve as the core expectations for virtual asset custodians and help build an effective, industry-wide framework for safeguarding digital assets.”
Regulator said
The SFC’s action comes after a spike in crypto security breaches in July, with blockchain security firm PeckShield estimating hack-related losses at $142 million a 27% increase from June.
While Beijing continues to enforce its ban on crypto trading and mining in mainland China, Hong Kong has taken the opposite approach, seeking to attract digital asset firms through a licensing system for exchanges. A separate licensing framework for stablecoin issuers came into force on Aug. 1.
