Circular on SFC-authorised funds with exposure to virtual assets

On May 27, 2026, the Securities and Futures Commission ("SFC") issued a revised circular establishing requirements for authorising public offerings of investment funds with virtual asset ("VA") exposure exceeding 10% of net asset value ("NAV") under sections 104 and 105 of the Securities and Futures Ordinance. These requirements exclude exposure to fiat-referenced stablecoins authorised under the Stablecoins Ordinance (Relevant Stablecoins) and tokenised deposits. Virtual asset refers to any asset defined in section 53ZRA of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. Tokenised deposits refer to digital representations of commercial bank deposits on blockchains. For Relevant Stablecoins and tokenised deposits, refer to FAQs on the Code on Unit Trusts and Mutual Funds. This circular supersedes the Circular issued on 7 April 2025.

Market Context and Investment Regimes

Globally, the VA landscape is evolving rapidly with diverse investment products gaining popularity. The SFC has introduced regimes to offer VA products to the Hong Kong public with investor protection safeguards, including accepting ETF applications in October 2022 for futures-based VA exposure. The Virtual Asset Trading Platform ("VATP") licensing regime became effective in June 2023. This circular sets requirements for SFC-authorised funds to invest directly in spot VA tokens accessible on SFC-licensed VATPs (direct exposure) or indirectly through futures on regulated exchanges and other exchange-traded products (indirect exposure).

Management and Investment Requirements

SFC-authorised VA Funds must comply with the Overarching Principles and Code on Unit Trusts and Mutual Funds (UT Code) in the SFC Handbook, alongside the Joint Circular on intermediaries’ virtual asset-related activities. Management companies must have a good regulatory compliance track record and at least one competent staff member with VA management experience. Additional terms may be imposed by the SFC’s Intermediaries Division. Funds must invest only in VA tokens accessible to the Hong Kong public on SFC-licensed VATPs. For VA futures, only those traded on conventional regulated futures exchanges are permitted, requiring demonstration of adequate liquidity and manageable roll costs. Indirect exposures via other products must meet UT Code requirements. Funds cannot have leveraged exposure at the fund level. Funds adopting futures strategies must implement active investment strategies for flexibility in portfolio composition, rolling, and market disruption handling.

Custody, Transactions, and Valuation

Spot VA transactions must occur through SFC-licensed VATPs or authorised financial institutions ("AIs") complying with HKMA requirements. For in-cash subscriptions/redemptions, spot VA ETFs must acquire/dispose of spot VA through VATPs. For in-kind transactions, participating dealers ("PDs") transfer spot VA to custody accounts with VATPs or AIs. PDs must be SFC-licensed or registered institutions subject to SFC terms. The trustee/custodian may delegate VA custody to an SFC-licensed VATP, an AI meeting HKMA standards, or other SFC-acceptable entities. Custodians must segregate VA holdings, store most in cold wallets (minimising hot wallet use), and ensure private keys are securely stored in Hong Kong, restricted to authorised personnel, resistant to speculation/collusion (e.g., multi-signature), and properly backed up. Valuation should use an indexing approach based on trade volume across major platforms. Management companies must confirm service providers are competent and ready.

Disclosure and Investor Protection

Offering documents and Key Facts Statements ("KFS") must disclose investment limits and key risks. KFS must disclose objectives and risks including price, custody, cybersecurity, and fork risks for spot VA, and roll costs and operational risks for VA futures. Management companies must conduct investor education per UT Code and follow the Joint Circular for distribution. Under the ASPIRe roadmap issued 19 February 2025, the SFC may allow funds to engage in staking and other VA-related activities through VATPs or AIs, subject to guiding principles: activities must align with fund objectives; robust internal controls must manage risks and conflicts; proper due diligence on counterparties is required; offering documents must disclose VA amounts and risks; material changes to objectives or risk profiles require prior investor notice; and reports must disclose VA holdings committed to activities, revenue, and expenses. The SFC may introduce additional conditions as necessary.

Exemptions and Consultation

These requirements do not apply to Recognised Jurisdiction Schemes (including UCITS) or funds under mutual recognition arrangements. Prior consultation and approval from the SFC are required for: (i) funds seeking authorisation with VA exposure >10% NAV; (ii) existing funds planning to obtain >10% NAV exposure; or (iii) funds intending to engage in staking. Staking refers to committing VAs for a validator to participate in a blockchain protocol’s validation process based on a proof-of-stake consensus mechanism. For staking details, see 20F of FAQs on the Code on Unit Trusts and Mutual Funds. For circular clarifications, contact the team supervisor or case officer of the Investment Products Division. The ASPIRe roadmap identified VA-related activities under Pillar P (Products).