Hong Kong’s Securities and Futures Commission (SFC) has introduced stricter custody standards for licensed virtual asset trading platforms (VATPs) in response to rising global crypto security risks.
In a Friday statement, the SFC said licensed platforms must critically review their asset custody frameworks, citing recent overseas incidents that exposed vulnerabilities and led to substantial client losses. An SFC review earlier this year also identified weaknesses in some exchanges’ cybersecurity controls.
The regulator issued a detailed circular outlining requirements that take immediate effect. These include:
- Senior management accountability for safeguarding client assets
- Robust cold wallet infrastructure
- Enhanced oversight of third-party wallet providers
- Real-time monitoring of security threats
The SFC said these rules will form the core expectations for virtual asset custodians going forward, aiming to establish a stronger, industry-wide custody framework.
Rising Security Threats Prompt Action
The move comes after July’s global crypto security breaches surged, with blockchain security firm PeckShield estimating hack-related losses at $142 million — up 27% from June.
While mainland China maintains its ban on crypto trading and mining, Hong Kong has taken a different path, seeking to position itself as a regulated hub for digital assets by encouraging licensed operations under clear compliance guidelines.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.