New Directions for the Development of the Virtual Asset Market in Hong Kong: Analysis of the SFC Roadmap

On February 19, 2025, the Securities and Futures Commission (SFC) of Hong Kong issued the "Virtual Asset Roadmap" to address the challenges faced in the development of the virtual asset trading market in Hong Kong.

The roadmap known as "A-S-P-I-Re" proposes 12 key measures from five critical aspects, outlining the direction for the development and regulation of the virtual asset market in Hong Kong over the next few years. These five aspects include: Access, Safeguards, Products, Infrastructure, and Relationships.

Current Status and Challenges of the Virtual Asset Market in Hong Kong

As one of the global financial centers, Hong Kong began exploring the regulatory framework for virtual assets in 2018. In 2023, the SFC brought virtual asset trading under its regulatory scope, requiring virtual asset trading platforms to obtain licenses. In April 2024, Asia's first virtual asset spot exchange-traded funds (ETFs) were listed on the Hong Kong Stock Exchange.

However, the virtual asset market in Hong Kong still faces some challenges:

1. Insufficient market activity: Despite a significant increase in global virtual asset market capitalization and trading volume in 2024, the market size in Hong Kong remains limited.

2. Market access restrictions: Some potential investors are unable to participate in the Hong Kong market in compliance.

3. Limited product categories: Trading mainly focuses on mainstream cryptocurrencies such as Bitcoin and Ethereum, with few innovations in derivatives.

The Five Pillars of the "A-S-P-I-Re" Roadmap

1. Access: Simplify market entry and provide a clear regulatory framework.

   • Consider establishing a licensing system for OTC trading and asset custody services.
   • Allows the establishment of a two-tier market structure that separates trading from custody.

2. Safeguards: Strengthening compliance and control

   • Researching the regulatory framework for new token listings and virtual asset derivatives trading aimed at professional investors.
   • Clarify investor access requirements and product classification
   • Adjust the ratio requirements of hot and cold wallets, and introduce diversified insurance and compensation mechanisms.

3. Products: Expand product categories, investment tools, and service innovations.

   • Explore new coin listings and virtual asset derivatives trading exclusively for professional investors.
   • Exploring the financing requirements for virtual asset collateral
   • Consider providing staking and lending services

4. Infrastructure: Upgrade regulatory infrastructure

   • Deploy a data-driven blockchain monitoring platform
   • Promote cross-border cooperation with global regulatory agencies

5. Relationships: Promote communication and education among investors

   • Build a cooperation mechanism with financial influencers
   • Establish a sustainable industry communication and talent development network

The Potential Impact of the Roadmap

If the initiatives in the "A-S-P-I-Re" roadmap can be successfully implemented, Hong Kong is expected to create a more active, diverse, and secure virtual asset investment environment in the coming years. Key highlights include:

1. Strengthen regulation comprehensively: cover virtual asset trading platforms, OTC trading, and custody services to enhance market safety.

2. Promote market development: Consider allowing virtual asset staking, which may bring multiple benefits such as capital appreciation, enhanced asset liquidity, and increased cash flow.

3. Emphasize investor education: Enhance investors' awareness of virtual assets and risk prevention capabilities by collaborating with financial influencers and establishing industry communication networks.

These measures are expected to enhance the activity of Hong Kong's virtual asset market, diversify investment strategies, and increase regulatory transparency, thereby helping Hong Kong to occupy an important position in the global virtual asset landscape and lead industry innovation and development.