Hong Kong’s financial watchdog is stepping up safeguards for cryptocurrency investors, introducing stricter custody requirements for licensed exchanges in response to mounting global security threats.
The Securities and Futures Commission (SFC) announced on Friday that all licensed virtual asset trading platforms (VATPs) must immediately strengthen how they store and protect client assets. The directive follows a series of high-profile overseas breaches that have cost users millions and exposed weaknesses in crypto custody systems.
An SFC review earlier this year uncovered shortcomings in some platforms’ defenses against cyberattacks. To address these vulnerabilities, the regulator issued a detailed circular outlining new expectations for the sector. The measures include:
- Clear accountability for senior management in safeguarding assets.
- Enhanced cold wallet infrastructure for offline storage of digital assets.
- Stricter oversight of third-party wallet providers.
- Continuous, real-time monitoring for security threats.
“These standards will form the core expectations for virtual asset custodians, helping build an effective, industry-wide framework for safeguarding assets,” the SFC said.
The move comes after blockchain security firm PeckShield reported that July’s crypto-related hacks caused an estimated $142 million in losses — a 27% jump from the previous month.
While mainland China continues to enforce a sweeping ban on cryptocurrency trading and mining, Hong Kong is charting its own path. The city has been actively positioning itself as a regional hub for digital assets through a dedicated licensing framework for exchanges. On August 1, it also launched a separate regime for stablecoin issuers, reinforcing its commitment to regulated crypto growth.
With these tougher custody rules now in place, Hong Kong aims to reassure investors and strengthen its reputation as a secure and well-regulated market for digital assets — even as global cyber risks continue to climb.
