The Hong Kong Securities and Futures Commission issued two circulars. What did they say and what impact do they have?

Author: Zhang Feng

On November 3, 2025, the Hong Kong Securities and Futures Commission (referred to as “SFC”) issued two important circulars on the same day: the “Circular on the Expansion of Products and Services of Virtual Asset Trading Platforms” and the “Circular on the Sharing of Liquidity by Virtual Asset Trading Platforms.” These two documents not only represent an important evolution of Hong Kong's virtual asset regulatory framework but also serve as strategic measures for Hong Kong to seize institutional advantages in the global digital asset competitive landscape and promote the stable development of the industry. This article will systematically interpret the core significance and far-reaching impact of these two circulars from the aspects of content, background, policy comparison, business impact, and future outlook.

I. Overview of the Core Content of Two Circulars

“Product Scalability Circular”: Promoting Product Diversification and Expanding Business Boundaries. The “Circular on Expanding Virtual Asset Trading Platform Products and Services” mainly focuses on “product diversification” and includes three core aspects:

First, relax the regulations on token inclusion. The requirement for virtual assets (including stablecoins) offered to professional investors to have a 12-month track record has been removed. Stablecoins issued by licensed stablecoin issuers are also exempt from this requirement and can be offered to retail investors. This move significantly lowers the listing threshold for emerging tokens and helps platforms quickly respond to market changes by introducing more innovative assets. However, other virtual assets aimed at retail investors still need to meet the 12-month track record requirement, reflecting a balance in regulation between encouraging innovation and protecting investors.

Secondly, clarify that platforms are allowed to distribute digital asset-related products and tokenized securities. Licensed platforms, under the premise of complying with existing regulations, can distribute digital asset-related investment products, including tokenized securities, and can open trust or client accounts for customers holding related assets. This means that platforms are no longer merely trading venues but can transform into comprehensive financial service providers, further enriching their business models.

Third, allow platforms to provide custody services for digital assets that are not traded on their platforms. Platforms can custody digital assets that are not listed for trading through affiliated entities, but they must comply with strict due diligence and risk control requirements. This regulation expands the revenue sources for platforms and provides users with a more comprehensive asset management solution.

“Circular on Shared Liquidity”: Building Cross-Domain Liquidity Pools to Enhance Market Efficiency. The “Circular on Shared Liquidity for Virtual Asset Trading Platforms” focuses on “liquidity integration”, aiming to allow licensed platforms to integrate order books with their overseas affiliated platforms, forming shared liquidity pools to achieve cross-platform trading pairs and execution. This circular proposes systematic regulatory requirements for the operation of shared liquidity:

Firstly, the partner must be a compliant overseas platform, and the judicial jurisdiction must have a regulatory framework that aligns with international standards;

Second, it is essential to establish a settlement mechanism for both currency and goods, set up a reserve fund to address settlement risks, and implement real-time monitoring;

Thirdly, it is necessary to establish a unified market supervision plan to prevent inappropriate behavior in cross-domain markets;

Fourth, the platform must bear all trading responsibilities, and fully disclose relevant risks to customers.

These regulations not only encourage platforms to enhance trading depth and efficiency through liquidity sharing, but also emphasize the importance of risk isolation and investor protection.

2. Deep Background of the Issuance of the Circular

Aligning with international standards to enhance the competitiveness of the system. In recent years, the global regulatory framework for virtual assets has been accelerating its establishment. International organizations such as the Financial Action Task Force and the International Organization of Securities Commissions have introduced multiple standard recommendations, emphasizing regulatory consistency, investor protection, and risk prevention. Hong Kong's move is a positive response to the international regulatory consensus, aiming to enhance the compatibility of its regulatory system with international standards and strengthen its international competitiveness. Especially against the backdrop of Singapore, Dubai, and the European Union successively introducing regulatory frameworks for virtual assets, Hong Kong urgently needs to maintain a leading position at the institutional level to attract global capital and talent.

Consolidating the Financial Center Position with Digital Assets. Virtual assets are a key track for Hong Kong to solidify its position as an international financial center and develop the digital economy. The “ASPIRe Roadmap” released in February 2025 clearly states that “products” and “connections” are the two main pillars to promote the development of the digital asset ecosystem. This circular is a concrete implementation of the roadmap at the policy level, reflecting Hong Kong's policy orientation to encourage innovation and expand market depth under the premise of controllable risk. Hong Kong hopes to create a “digital asset hub” through institutional dividends, gaining a first-mover advantage in areas such as asset tokenization, cross-border settlement, and digital securities.

Responding to homogeneous competition and enhancing overall competitiveness. Currently, Hong Kong's virtual asset trading platforms are facing issues such as product homogenization, fragmented liquidity, and increasing competitive pressure from international platforms. Expanding the range of products and introducing a shared liquidity mechanism can help improve the comprehensive service capabilities and market efficiency of local platforms, narrowing the gap with global mainstream platforms. Especially in terms of trading depth, asset types, and user experience, Hong Kong platforms urgently need to achieve leapfrog development through institutional innovation.

3. Comparison of Similarities and Differences Between Two Circulars

Similarities: Seeking progress while maintaining stability, balancing development and risk. Both circulars aim to achieve the dual objectives of “promoting market development and preventing financial risks,” reflecting the CSRC's regulatory approach of “seeking progress while maintaining stability.” They are both important steps towards the refinement and systematization of Hong Kong's virtual asset regulatory framework, aimed at enhancing market vitality and investor confidence. In terms of regulatory methods, both emphasize compliance as a baseline, requiring platforms to strengthen risk control, information disclosure, and investor protection while expanding their business.

Differences: Dual Driving Forces of Product Innovation and Market Infrastructure. The “Product Expansion Circular” focuses on “product innovation” by relaxing token admission, allowing for the distribution and custody of diversified assets, thus expanding the platform's business boundaries and revenue sources; the “Shared Liquidity Circular” focuses on “market infrastructure” by enhancing trading efficiency and optimizing price discovery through liquidity integration, thereby strengthening the global appeal of the Hong Kong market.

In brief, the former addresses the question of “what can be traded,” while the latter tackles the issue of “how to trade more efficiently.” The two complement each other and together form the dual engines of the development of the virtual asset market in Hong Kong.

4. Impact on Platform Operations

Short-term opportunities and challenges coexist. In the short term, licensed platforms will face opportunities for business expansion. The “Product Expansion Circular” enables platforms to quickly launch emerging tokens and stablecoins, distribute tokenized securities and digital asset products, and explore the custody services market; the “Shared Liquidity Circular” allows platforms to access global liquidity, enhancing trading depth and customer experience.

However, the platform also faces the challenge of rising compliance costs. It is necessary to strengthen due diligence, risk control, system construction, and information disclosure, especially in areas such as cross-border settlement, market supervision, and customer asset protection, where corresponding resources must be invested to meet regulatory requirements. If small and medium-sized platforms cannot bear these costs, they may face the risk of being eliminated or integrated.

Long-term promotion of market structure reshaping. In the long term, these two policies will promote the reshaping of market structure. The enhancement of product and service capabilities will attract more institutional and retail investors to participate, expanding the market size; liquidity integration will accelerate the differentiation among platforms, and those platforms with technological and risk control advantages will stand out; Hong Kong is expected to become a hub for innovation in digital asset products and cross-border trading in Asia, increasing its node value in the global digital financial network.

V. Outlook on the Development and Regulation of Digital Assets in Hong Kong

The release of these two circulars marks a new stage in Hong Kong's virtual asset regulation, transitioning from “prudent access” to “precise development.” The Securities and Futures Commission not only aligns its system with international standards but also demonstrates foresight and systematic thinking in its policy design.

In the future, Hong Kong may continue to deepen in the following aspects:

• Gradually bring more categories of digital assets under regulatory oversight, such as RWA, DeFi protocols, etc.;

• Promote cross-border regulatory cooperation, establish a multilateral mutual recognition mechanism, and enhance international collaboration efficiency;

• Explore the application of central bank digital currencies in virtual asset trading to enhance settlement efficiency and security;

• Strengthen technological regulatory capabilities, utilizing tools such as blockchain analysis and AI monitoring to enhance law enforcement efficiency.

The Hong Kong Securities and Futures Commission has issued two letters in quick succession, which is a timely response to the demands of market development and a strategic move to lay the groundwork for the future of digital finance. Under the premise of ensuring market stability, Hong Kong is steadily advancing towards the construction of a digital asset ecosystem with international competitiveness through the dual drive of “opening up products and connecting liquidity.” For market participants, only by grasping policy dividends and solidifying compliance foundations can they navigate this wave steadily and sustainably.