Hong Kong SFC Tightens Crypto Custody Rules

• SFC introduces new crypto custody standards
• Exchanges must segregate and secure client assets
• Non-compliance could lead to license revocation

The Hong Kong SFC (Securities and Futures Commission) has issued new crypto custody rules aimed at tightening oversight of virtual asset trading platforms. These updates are part of Hong Kong’s push to become a global crypto hub with clear, investor-focused regulations.

Under the new rules, all licensed crypto exchanges must now segregate client assets from their own. This is a crucial step to prevent asset commingling—a problem that has led to significant investor losses in past crypto exchange failures.

The SFC also mandates that platforms improve how they store and protect private keys. This includes implementing multi-layered cybersecurity, regular audits, and clearly defined internal controls to protect against both hacking and internal misconduct.

Mandatory Compliance for All Licensed Platforms

The SFC crypto custody rules apply to all exchanges licensed under Hong Kong law. Failure to meet the updated requirements could result in enforcement actions, including license suspension or cancellation.

By enforcing these rules, the SFC aims to boost investor confidence and align Hong Kong with international standards for digital asset regulation. These measures not only make the market safer for retail investors but also help establish the city as a credible and secure location for crypto businesses.

With the global crypto industry under increasing scrutiny, Hong Kong’s latest move signals a proactive approach to responsible innovation—offering both freedom and protection within the digital finance space.

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