Hong Kong has implemented a comprehensive custody framework to boost customer asset protection at licensed crypto trading platforms.
The Securities and Futures Commission (SFC) now requires exchanges to enhance cold wallet infrastructure, introduce third-party audits, and implement real-time threat monitoring in response to recent overseas security breaches. The regulator said these standards apply not only to trading platforms but also to all virtual asset custodians, with immediate effect. Alessio Quaglini, co-founder of Hex Trust, noted this move will likely concentrate the market among firms with the scale and expertise to meet these requirements.
The SFC’s move comes after hack-related losses surged to $142 million in July, up 27% from the previous month. The regulator’s earlier review this year revealed insufficient cybersecurity controls at some platforms. The new framework also clarifies senior management responsibilities to ensure better oversight.
While mainland China continues to ban crypto trading and mining, Hong Kong is taking the opposite approach. With its exchange licensing regime and a stablecoin licensing framework effective August 1, the city aims to attract global crypto firms. Security and regulation are becoming central pillars of its bid to become a leading digital asset hub.
