Summary
The Hong Kong Securities and Futures Commission (SFC) recently announced two regulatory circulars concerning licensed virtual asset trading platforms (VATPs): (Circular on the sharing of liquidity by virtual asset trading platforms) and (Circular on expanding the products and services of virtual asset trading platforms). These two documents mark another upgrade of the regulatory framework for virtual assets in Hong Kong: on one hand, allowing licensed platforms to share global liquidity under strict regulation; on the other hand, supporting platforms to expand more virtual asset-related products and services under compliance. This article will provide a comprehensive interpretation from the perspectives of policy content, regulatory logic, industry impact, and developers.
I. Regulatory Background: The Path from Compliance to Openness in Hong Kong
Since the launch of the licensing system in 2023, the SFC has continuously improved the regulatory ecosystem of Hong Kong's virtual asset market. In early 2025, the SFC proposed the 'A-S-P-I-Re' regulatory roadmap, covering five major directions:
Access, Safeguards, Products, Infrastructure, Relationships.
This framework aims to balance 'innovation' and 'safety', promoting Hong Kong as the virtual asset hub of Asia.
The two recently released circulars are extensions and implementations of this strategy:
(Shared Liquidity Circular) Focus on 'Liquidity and Market Access';
(Product and Service Expansion Circular) Focus on 'Product Innovation and Service Diversification'.
This marks the transition of Hong Kong's virtual asset trading platforms from the 'licensed compliance' stage to a new stage of 'open collaboration and product innovation'.
II. (Shared Liquidity Circular): A Bridge Connecting Global Markets
Core Content
The SFC first clarifies that licensed virtual asset trading platforms (VATPs) may share liquidity pools (Liquidity Pool) with their overseas affiliated platforms or other trading platforms, including order books (Order Book), market-making resources, and counterparty transactions, provided they meet regulatory requirements.
Main requirements include:
Regulatory Reporting: Shared arrangements must be disclosed to the SFC in advance and approved;
Client Asset Segregation: Hong Kong client assets must be strictly separated from overseas platform assets;
Risk Control and Monitoring: Must have mechanisms for anti-manipulation, anti-money laundering, and market monitoring;
Transparent Disclosure: Clients must clearly understand whether transactions are completed in the shared pool, along with associated fees and risks.
Regulatory Logic
Shared liquidity can significantly enhance trading depth and price efficiency, but also brings cross-border compliance and market manipulation risks. The SFC adopts the principle of 'allowing but strictly controlling':
'Open global liquidity under the regulatory framework, rather than allowing foreign liquidity to bypass regulation.'
Industry Impact
Positive Aspects: Enhanced liquidity, narrowed spreads, improved trading efficiency, conducive to Hong Kong platforms aligning with international standards;
Challenges: Rising technology and compliance costs; platforms need to strike a balance between compliance and efficiency.
III. (Product and Service Expansion Circular): Building a Diverse Ecosystem for Virtual Assets
Core Content
The SFC clearly states in the second circular that licensed VATPs are allowed to expand more virtual asset products and services under the compliance framework, such as:
Staking and Lending Services
Margin Trading and Leverage Products
Virtual Asset Derivatives
Providing structured products for professional investors
But it also emphasizes:
Different client categories (retail/professional) require differentiated regulation;
New products must be reported in advance and undergo compliance assessment;
Must provide adequate risk disclosures, suitability assessments, transaction monitoring, and asset segregation mechanisms.
Regulatory Logic
The SFC hopes to attract more institutions and innovative businesses to establish in Hong Kong through product diversification, but insists on 'not trading off innovation for relaxed regulation'. The protection of retail clients remains the bottom line.
Industry Impact
Platform Side: Expandable business models and revenue sources; more differentiated service platforms will emerge in Hong Kong;
Investor Side: Access to more asset classes and yield methods, but need to enhance risk awareness and investment judgment.
IV. Regulatory Trends: Hong Kong's Virtual Asset Market Driven by Dual Engines
The two circulars form a complementary structure:
Directional Circular Target Risk Prevention Key Market Access and Liquidity Sharing Liquidity Circular Connecting Global Markets, Enhancing Liquidity Cross-Border Regulation, Manipulation Risks, Client Asset Protection Product Innovation and Services Product and Service Expansion Circular Expanding the Virtual Asset Ecosystem and Diverse Products Investor Suitability, Leverage, and Derivative Risks
This means that Hong Kong's virtual asset market is moving from 'compliance licensing' to 'compliant innovation', with regulation and innovation advancing in parallel.
V. Insights for Developers and Platforms
For blockchain/Web3 developers and platform designers, the two circulars present new system design and compliance challenges:
Shared Liquidity Architecture Design
Need to achieve cross-platform matching, order synchronization, and transaction monitoring;
Ensure asset segregation and independent settlements;
Achieve real-time compliance reporting and auditing interfaces.
Product Expansion and Risk Module Design
Support for multi-tier client systems (retail/professional);
Built-in risk disclosures, suitability assessments, and leverage limits;
Clearly indicate risk parameters and forced liquidation rules in the front-end UI.
Cross-Border Compliance Interfaces and Data Governance
Shared liquidity means cross-border data transmission and matching, which must meet the data compliance requirements of Hong Kong and overseas;
Design should consider traceability, AML/CTF modules, and regulatory reporting APIs.
VI. Conclusion: The Balance of Regulation and Innovation
The two circulars from the SFC send a clear signal:
Hong Kong is no longer just a 'regulatory demonstration zone', but aims to become an 'international hub for compliant innovation'.
By allowing shared liquidity and expanding product services, the SFC is building a new regulatory model that balances global connectivity, market depth, and investor protection.
In the future, Hong Kong's virtual asset ecosystem will be more open, more mature, but also more constrained by regulatory requirements.
For platforms, developers, and investors, only by innovating on a compliant basis can they truly share in the dividends of this market upgrade.