Hong Kong Cracks Down: New Custody Rules for Crypto Exchanges Shake the Market

Hong Kong's financial watchdog just dropped a regulatory hammer—licensed crypto platforms now face stricter custody requirements. No more cutting corners.

Here's the breakdown:

Cold wallets or bust
Exchanges must store 98% of client assets in cold storage by Q1 2026. The remaining 2%? Insured hot wallets only—with quarterly audits.

Bank-level security or exit stage left
Multi-sig mandates and penetration testing become non-negotiable. Three exchange licenses already got suspended during the 30-day compliance window.

The institutional effect
While retail traders groan about withdrawal delays, hedge funds are quietly applauding. Finally, a jurisdiction treating crypto like real finance—complete with paperwork and compliance theater.

One veteran trader quipped: 'Guess we'll see who's been playing fast and loose with customer funds.' The market's response? A 5% dip in HK-based exchange tokens within 24 hours.

Welcome to grown-up crypto regulation—where the rules are made up, but your keys definitely aren't (anymore).