Hong Kong’s SFC Mandates Stricter Crypto Custody Rules Amid Global Security Concerns

Hong Kong's Securities and Futures Commission (SFC) has unveiled stringent custody requirements for licensed VIRTUAL asset trading platforms, mandating cold wallets with air-gapped hardware and whitelisting protocols. The move follows a surge in cybersecurity breaches at overseas exchanges that resulted in significant client losses.

The regulatory framework positions these standards as the foundation for a future licensing regime covering standalone custodians and private key management tools. Dr. Eric Yip, the SFC's executive director of intermediaries, framed the measures as critical for building a "competitive, sustainable and trusted digital asset ecosystem" in Hong Kong.

This development forms part of the SFC's broader digital asset regulatory roadmap, with a separate public consultation planned for custodian licensing. The circular specifically cited vulnerabilities in wallet systems and inadequate controls at international platforms as justification for the tightened safeguards.