Hong Kong SFC Enacts Stricter Custody Rules for Crypto Platforms

The Hong Kong Securities and Futures Commission has mandated stricter custody regulations for virtual asset platforms, impacting compliance standards and industry practices across the region.

These new regulations may consolidate the market toward larger players, potentially altering industry dynamics and impacting smaller exchanges facing increased compliance costs.

Market Dynamics and Community Feedback Under New Rules

Hong Kong’s Securities and Futures Commission (SFC) has implemented new regulations demanding virtual asset platforms adopt rigorous custody protocols. Key players, including Ex.io and other locally licensed exchanges, are affected by this policy, which assigns additional responsibilities to senior management. These new custody standards aim to ensure robust security for user assets and involve new operational controls.

The regulatory shift is set to alter market dynamics by raising the compliance bar for virtual asset trading platforms. This will likely encourage market concentration, as small or new entrants may struggle to meet the financial and infrastructural demands imposed by the new rules. Additionally, the requirement to use whitelisted withdrawal addresses and certified hardware security modules is expected to enhance asset safety.

Community reactions have been relatively muted so far. However, Ex.io CEO Chen Wu highlighted the critical nature of the circular in raising custody standards, adding that the shift could act as a barrier to entry for less-established players.

“The circular is a critical step in raising custody standards for local service providers.” – Chen Wu, Co-founder and CEO, Ex.io

Historical Context, Price Data, and Expert Analysis

Did you know? Hong Kong’s previous tightening in virtual asset service regulations in 2025 drove significant consolidation in the market, favoring well-capitalized exchanges.

Bitcoin (BTC), a major asset on these platforms, recently traded at $117,864.58, reflecting a marginal 0.00% change over the past day as per CoinMarketCap. Its market cap is reported at $2.35 trillion, exhibiting a market dominance of 58.72%. The trading volume over 24 hours marked a sharp drop of 29.46%, presenting continued volatility.

The Coincu research team emphasizes that stricter custody regulations could make Hong Kong a more attractive location for institutional investors seeking a secure trading environment. However, the higher operational costs may stymie smaller exchanges, thus potentially decreasing market diversity.