On 30 Sep 2025, the HKMA and SFC issued a Supplemental Joint Circular amending regulatory requirements for intermediaries providing virtual asset dealing and advisory services. The proposals establish strict client eligibility rules, mandatory segregated custody of client virtual assets, enhanced risk disclosures for retail investors, and comprehensive staking service regulations. If implemented, these changes will require intermediaries to operate under omnibus accounts with SFC-licensed platforms, conduct rigorous client suitability assessments, and maintain detailed records for seven years.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
SFC Regulation of Virtual Asset Trading Platforms: The Emerging Hong Kong Framework
SFC proposes new regulation of virtual assets through licensing of operators of cryptocurrency and other digital asset trading platforms
Market Misconduct Tribunal: A Guide to Penalties and Other Consequences for Misuse of Insider Information
Market Misconduct Tribunal proceedings for mishandling of insider information can result in fines and disgorgement orders
SPOTLIGHT ON
FAMILY OFFICES
Introduction
On 30 Sep 2025, the Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) issued a Supplemental Joint Circular establishing comprehensive regulatory requirements for intermediaries providing virtual asset-related services, amending existing frameworks to address risks in virtual asset dealing and advisory activities under omnibus account arrangements.
Licensing Conditions for Virtual Asset Dealing Services
The proposals specify that licensed corporations or registered institutions may only provide virtual asset dealing services through omnibus accounts with SFC-licensed platforms. Intermediaries must restrict services to existing Type 1 regulated activity clients (dealing in securities), with separate rules for retail vs. professional investors. Introducing agents must only refer clients to SFC-licensed platforms and cannot hold client assets or provide dealing/custody services.
Key Terms and Conditions
The Terms and Conditions mandate strict operational controls: (i) client knowledge assessments and risk profiling for retail investors; (ii) liquidity requirements for recommended virtual assets (must appear in two independent indices from separate providers); (iii) mandatory segregated custody of client virtual assets via VA Segregated Accounts with SFC-licensed platforms or HKMA-approved custodians; (iv) prohibition on financial accommodation for virtual asset purchases; (v) enhanced disclosure of virtual asset risks including legal uncertainty, irreversibility, and lack of investor compensation coverage.
Staking Service Regulations
Intermediaries may only provide staking services through SFC-licensed platforms or HKMA-approved custodians, requiring regulatory approval before commencement. Services must comply with client standing authorities, with mandatory disclosure of staking risks (e.g., slashing, lock-up periods, hacking) and compensation arrangements. Prior to service provision, retail clients must execute risk acknowledgment forms.
Record Keeping and Reporting
Intermediaries must maintain detailed records for seven years (two years for contract notes/receipts), including transaction trails, client risk profiles, and custody arrangements. Annual auditor reports must confirm compliance with custody and record-keeping requirements. Material non-compliance must be reported to the SFC/HKMA immediately, with periodic information requests on virtual asset activities.
Virtual Asset Advisory Services
Licensing conditions require intermediaries to restrict advisory services to existing Type 4 regulated activity clients (advising on securities), with identical client suitability and knowledge assessment requirements as dealing services. The Terms and Conditions mandate written client agreements containing suitability clauses and enhanced disclosure of virtual asset risks, including liquidity criteria for retail recommendations.
View the full article:Source
