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#Hong Kong #SFC #Web3 Introduction Recently, the Hong Kong Securities and Futures Commission (SFC) released two pivotal circulars for licensed Virtual Asset Trading Platform (VATP) operators — marking a major step forward in Hong Kong’s virtual asset regulatory framework. Hong Kong Steps Up Again On November 3, the SFC issued two significant documents: Circular on the Sharing of Liquidity Among Virtual Asset Trading Platforms Circular on Expanding the Products and Services of Virtual Asset Trading Platforms These updates signal Hong Kong’s virtual asset (VA) market entering a new era — one that is open, interconnected, and institutional-grade. Policy Focus: Dual Circulars Define “Global Connectivity and Product Expansion” The two circulars align with the SFC’s ASPIRe regulatory roadmap, emphasizing two core pillars: A (Access) — Opening liquidity connectivity with overseas markets P (Products) — Expanding the scope of virtual asset products and services In simpler terms, two breakthroughs stand out: Hong Kong trading platforms can now share liquidity with overseas exchanges, making funds, order books, and prices more global. Platforms are allowed to list and distribute more innovative assets and investment products, including stablecoins and tokenized securities. One connects the global market’s “arteries,” the other opens the “floodgates” of new asset types — together reshaping the entire crypto ecosystem. Policy Details: Key Takeaways (Condensed) The SFC’s new circulars introduce major reforms to liquidity connectivity and product/service expansion, reflecting Hong Kong’s renewed strategic ambition in digital asset regulation and globalization. 1. “Liquidity Connection / Global Order Book” Mechanism Licensed platforms are now permitted to share order books with affiliated overseas platforms, integrating trading instructions across jurisdictions. This means Hong Kong-licensed exchanges can directly access global liquidity, enhancing price depth and execution efficiency. This step marks the first major move under the “Access” pillar of the ASPIRe roadmap. Next, regulators may allow licensed brokers to route client orders to overseas liquidity pools under the same corporate group. SFC CEO Julia Leung noted this will strengthen Hong Kong’s position as a global virtual asset hub, supported by safeguards including: Delivery-versus-payment (DVP) settlement Client pre-funding mechanisms Local reserve fund for investor compensation Cross-border supervisory cooperation Through these measures, Hong Kong brings in global liquidity without compromising regulatory stability or investor protection. 2. Product and Service Expansion The second circular expands service scope for professional investors (PIs) and beyond. Key changes include: Permission to list virtual assets (including stablecoins) with less than 12 months’ track record, loosening historical performance requirements; Authorization to distribute HKMA-licensed stablecoins, tokenized securities, and other digital-asset investment products; Allowing affiliated entities to custody virtual assets or tokenized securities not traded on the platform — broadening service boundaries. This marks a transition from a “trading-focused market” to a “comprehensive digital asset services ecosystem”, giving institutions and professional investors greater flexibility. 3. Regulatory Attitude and Strategic Positioning The circulars convey Hong Kong’s clear regulatory direction: Strategic goal: Attract global trading flow and liquidity providers to solidify Hong Kong as an international crypto-asset center. Regulatory principle: Uphold the “same business, same risk, same regulation” approach to align virtual asset oversight with traditional finance. Risk control: Even with loosened product entry rules, platforms must maintain strict due diligence, disclosure, and compliance operations. Overall, the new guidance marks a shift from “cautious” to “progressive” regulation — opening gateways while upholding safeguards, drawing deeper international liquidity and capital vitality to Hong Kong. In-Depth Analysis of the New Guidelines 1. Liquidity Sharing: Hong Kong’s Move Toward Global Market Integration 1）Why enable liquidity sharing? Previously, one of crypto’s biggest problems was fragmented liquidity. Hong Kong users trading on local platforms faced shallow depth and wide spreads, while offshore exchanges offered liquidity but lacked regulation. The SFC now explicitly permits shared order books between Hong Kong-licensed and overseas affiliated exchanges — allowing unified trade depth and order flow. In effect: Hong Kong investors access global liquidity pools directly; Tighter spreads and smoother execution; More efficient price discovery across markets. From a macro perspective, this is a cornerstone of Hong Kong’s strategy to draw global liquidity back onshore. 2）Regulatory Requirements: Licensing: Overseas platforms must be regulated in FATF-member jurisdictions; DVP Settlement: All transactions must settle assets and payments simultaneously to eliminate counterparty risk; Daily Clearing & Reserve Fund: Platforms must maintain daily reconciliations and a reserve fund for client protection; Joint Surveillance: Hong Kong and overseas affiliates must jointly monitor trading to prevent manipulation and insider abuse; Risk Disclosure: Platforms must clearly inform retail users of all cross-border risks before participation. In short: The SFC is “loosening with control” — building global depth atop international-standard oversight. 3）Direct Benefits for Investors: Faster trades, tighter spreads: Access to global liquidity improves matching and execution depth. Greater transparency: Platforms must disclose liquidity sources and settlement mechanisms. Broader access: As the shared model matures, more global assets and stablecoins will trade compliantly in Hong Kong. This move boosts Hong Kong’s market competitiveness and connects local investors to the global crypto economy. 2. Product and Service Expansion: Stablecoins and Tokenized Securities Enter the Mainstream The second circular focuses on expanding product boundaries, with several crucial breakthroughs — marking another leap in compliant crypto finance. 1）Stablecoins Recognized and Retail-Accessible Previously, virtual assets needed 12+ months of market history to list for retail trading. Now: For professional investors: That requirement is scrapped entirely. For retail users: If a stablecoin is licensed by the Hong Kong Monetary Authority (HKMA), it can be sold directly. This means HKD-backed stablecoins and major assets like USDT can trade in fully compliant Hong Kong settings — a major milestone for stablecoin regulation. 2) Tokenized Securities and Digital Investment Products For the first time, the SFC explicitly permits licensed platforms to distribute tokenized securities and related investment products. Investors will soon be able to trade crypto, tokenized bonds, funds, commodities, and even real estate — all on one regulated platform. This creates a tangible bridge between TradFi and Web3, positioning Hong Kong as the global hub for tokenized real-world assets (RWAs). 3) Custody Extension for Non-Traded Assets Previously, platforms could only custody assets traded on their own venues. Now, affiliated entities may custody off-platform assets, such as OTC or private tokens — turning exchanges into full-scale digital asset infrastructure providers. This broadens business models from “trading intermediaries” to institutional-grade digital finance ecosystems. Industry Impact: Hong Kong Enters the “Global Compliant Liquidity Hub” Era This policy shift is not a minor tweak — it’s a structural upgrade in regulatory logic. 1.Opening Market Borders From “isolated local regulation” to “international interoperability.” From “local depth” to “global liquidity integration.” 2.Diversifying Asset Classes Moving beyond traditional crypto toward stablecoins, tokenized securities, and digital investment vehicles. 3. Strengthening Risk Controls Hong Kong’s key principle remains balance — promoting innovation while safeguarding compliance. The message is clear: Hong Kong aims to be the model jurisdiction for global digital asset regulation. Conclusion: From “Regulatory Pilot” to “Global Blueprint” This SFC initiative is not merely an update to rules — it’s a signal of financial openness. It tells the market that Hong Kong is not restricting crypto, but rather anchoring innovation in compliance. Liquidity sharing connects Hong Kong to the world. Product expansion fosters inclusivity and innovation. Together, they define the next five years of Hong Kong’s crypto narrative. In short: Hong Kong is no longer just a regulator — it is becoming a builder of the global Web3 ecosystem.