Circular on staking services provided by virtual asset trading platforms

On April 07, 2025, the Securities and Futures Commission ("SFC") of Hong Kong published a regulatory circular detailing the standards and requirements for SFC-licensed Virtual Asset Trading Platforms ("VATPs") offering staking services. This circular underscores the need for VATPs to adhere to regulatory standards and licensing conditions to ensure integrity and security within the financial sector.,The SFC's decision to modify VATP licensing conditions to accommodate staking services reflects the growing investor demand for such services. Staking services involve committing client virtual assets ("VAs") to a blockchain protocol for validation, with returns generated through a proof-of-stake consensus mechanism.,Key regulatory requirements for VATPs providing staking services include stringent internal controls to manage client VAs, disclosure obligations to inform clients about associated risks and processes, and careful selection of blockchain protocols and third-party service providers.,VATPs must maintain possession or control over client VAs to ensure compliance with SFC regulations. Effective policies for error detection and risk mitigation, along with controls for operational risks and conflicts of interest, are mandatory.,Transparency in staking services is essential. VATPs must disclose general information about their services, including specific VAs, fees, lock-up periods, and risk factors, on their websites and mobile applications.,Selecting blockchain protocols and third-party service providers requires due diligence. VATPs must evaluate third-party providers' experience, technology infrastructure, risk mitigation measures, and security protocols.,Obtaining prior written approval from the SFC is mandatory for VATPs planning to provide staking services. The approval is subject to specific conditions outlined in the Terms and Conditions, detailed in the Appendix of the circular.,For any inquiries related to the circular, the SFC’s Fintech Unit should be contacted. The Appendix includes specific examples to illustrate compliance with staking service provision rules, such as the possession or control of both withdrawal address private keys and pre-signed exit messages.