Hong Kong’s New Virtual Asset Rules: What You Need to Know

§ 01 Executive Snapshot

• What: Hong Kong's regulators have issued new rules for virtual asset financing, custody, and stablecoin dealing.
• Who: Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC).
• Why it matters: These updates are significant for enhancing the regulatory framework around virtual assets, ensuring better security and compliance in the market.

§ 02 Key Developments

• Licensed institutions can provide virtual asset financing to securities margin clients, with eligible collateral limited to bitcoin, ether, and HKMA-licensed stablecoins.
• A minimum haircut of 60% is mandated for both bitcoin and ether collateral.
• Institutions are required to store 98% of client virtual assets in cold storage, utilizing Hardware Security Modules (HSMs) for key generation.

§ 03 Strategic Context

• The new rules supersede previous standards from February 2024, indicating an evolution in the regulatory landscape for digital assets in Hong Kong.
• The Stablecoins Ordinance, effective August 1, 2025, lays the foundation for a risk-proportionate approach to stablecoin dealings, reflecting a shift towards a more flexible regulatory framework.

§ 04 Strategic Implications

• Immediate implications include increased security measures for client funds, potentially leading to greater trust in virtual asset services.
• Long-term, these regulations may foster a more robust digital asset ecosystem in Hong Kong, attracting more institutional participation.

§ 05 Risks & Constraints

• Potential risks include regulatory compliance challenges and the need for institutions to adapt to stringent security requirements.
• Competition may arise from jurisdictions with more lenient regulations, posing a threat to Hong Kong's position as a leading hub for virtual assets.

§ 06 Watchlist / Forward Signals

• Institutions must consult with the HKMA before launching any digital asset custodial activities, indicating a proactive regulatory engagement.
• Monitoring the rollout of the Stablecoins Ordinance and its impact on the market will be crucial in assessing the effectiveness of these new rules.