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Hong Kong SFC Strengthens Crypto Custody Regulations
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The Securities and Futures Commission (SFC) of Hong Kong has introduced more stringent custody regulations for licensed cryptocurrency exchanges in an effort to bolster the protection of user assets. This initiative marks a significant step in enhancing the security framework for virtual asset trading platforms (VATPs).
Addressing Crypto Wallet Vulnerabilities
In a recent update on its official website, the Hong Kong SFC announced a new circular that outlines minimum custody requirements for all licensed VATPs. This document covers critical topics such as cold wallet management and real-time threat monitoring while also providing examples of best practices in the industry.
The establishment of these standards is a direct response to overseas cybersecurity incidents that have highlighted vulnerabilities in the wallet management systems of crypto exchanges. According to a report by Hacken, the industry suffered losses amounting to $3.1 billion due to cyberattacks in just the first half of 2025.
Stricter Measures for VATPs and Custodians
Earlier this year, the Hong Kong regulator performed a targeted review to assess VATPs against similar vulnerabilities. The review found that while most platform operators had basic control measures in place, some responses were insufficient.
The new custody standards are not only applicable to VATPs but also to virtual asset custodians. The SFC emphasizes that these guidelines will serve as prerequisites for transitioning to advanced custody technologies.
Dr. Eric Yip, Executive Director of Intermediaries at SFC, stated, “For Hong Kong to build a competitive, sustainable, and trusted digital asset ecosystem, safeguarding client assets must always be a priority for all licensed VATPs. They can utilize the SFC’s practical guidance to enhance their custody practices, particularly amid increasing global risks.”
This regulatory move aligns with Hong Kong’s broader efforts to position itself as a crypto-friendly jurisdiction. In May, the city’s stablecoin legislation was passed and took effect at the start of the current month.
Prominent entities, including Standard Chartered in a joint venture, have expressed interest in applying for a stablecoin license under this regulation. However, the first batch of license approvals is anticipated no sooner than 2026.
Bitcoin Experiences a Price Dip Below $118,000
The leading cryptocurrency, Bitcoin, experienced a notable price drop on Thursday, falling below the $118,000 threshold. This was influenced by an interview featuring US Treasury Secretary Scott Bessent, who mentioned that the government does not plan to purchase the digital asset for its Strategic Reserve, opting instead to utilize confiscated assets.
Following the interview, Bessent clarified on social media that the Treasury is also open to exploring budget-neutral methods of acquiring more of the asset. Despite an initial recovery in Bitcoin’s price, the digital currency soon reverted to around $117,800.
