Hong Kong's Virtual Asset Market: How to Survive the New SFC Regulations for Web3 Businesses?

On February 19, 2025, the Securities and Futures Commission (SFC) of Hong Kong threw a shocker - the official release of the "Virtual Asset Supervisory Roadmap "A-S-P-I-Re". This five-year strategic blueprint not only points out market vulnerabilities, but also releases key signals:Hong Kong to Move from Compliance Test Bed to Global Virtual Asset Liquidity CenterHow will the new regulations disrupt the current market landscape and how should Web3 companies respond? How will this new regulation disrupt the current market landscape and how should Web3 companies respond?

The Five Pillars Explained: The Deeper Logic Behind the Regulatory 'Laxity'

1. Market Access: Breaking up local monopolies and introducing international "fish"

  • Filling in the gaps in OTC and custodian regulationIn the past, over-the-counter (OTC) trading and asset custody were in a gray area. The new regulations will establish a separate licensing system and require all service providers to be "licensed". This means that the security of block trading will be greatly improved, but small and medium-sized OTC platforms may be forced to leave the market due to the cost of compliance.
  • Liberalization of the Global Mobility PortalSFC plans to lower the threshold and introduce international liquidity providers (LPs) and overseas exchanges. This move will have a direct impact on local licensed platforms (such as HashKey Exchange), which may face a battle for survival in the future between "international order books vs. local liquidity".

2. Safeguards: from "one-size-fits-all" to "fine-tuned risk controls

  • Laxity in hot and cold storage ratios: Existing mandatory cold storage requirements often lead to liquidity depletion during peak trading hours. The new regulations allow platforms to deploy their own storage ratios, but they need to be accompanied by a real-time audit system - a standard that small platforms with weak technical capabilities may find difficult to meet.
  • Insurance FlexibilityThe new approach is to abolish uniform compensation standards and to allow companies to choose insurance solutions according to their business model. This is a double-edged sword for high-risk businesses such as derivatives: costs may fall, but the threshold of investor trust will rise.

3. Product innovations: a "privilege game" for professional investors

  • Derivatives and Staking Open the GateDerivatives trading, which is restricted to professional investors (PIs), as well as pledged lending services under the compliance framework, will be the battleground for a new round of "arms race" for platforms. It is important to note that the SFC's explicit requirement for "transparency in the distribution of proceeds" may reduce the scope for arbitrage in DeFi agreements.
  • Dual-track system for listing tokensThe current rules apply to mainstream currencies, while new tokens are subject to a Due Diligence (DD) process recognized by the SFC. If the project side wants to land on the Hong Kong Stock Exchange, the cost of compliance audit may increase by more than 30%.

The Hidden Killer: RegTech's All-Out Siege

Under the "Infrastructure" pillar, SFC has launched a three-pronged approach:

  • Upgrade of chain monitoring systemThe following are some of the reasons for this: Trading platforms are required to access regulatory APIs and report real-time data such as wallet addresses and large transactions. Anonymous and mixed-currency service providers may be "technically blocked".
  • Cross-Border Collaborative Warfare: Establish a data sharing mechanism with the Hong Kong Police, the HKMA and international regulatory organizations. The room for survival of "migratory bird" projects that used to engage in multinational regulatory arbitrage will be minimized.
  • Institutionalization of KOL regulationThe promotional content of financial network red (Finfluencers) is subject to compliance checks, and misleading publicity may be subject to criminal liability. This is tantamount to cutting off the traditional routine of "shouting orders to cut leeks".

Web3 Businesses' Life and Death Decision: Compliance Costs vs. Market Dividends

In the face of escalating regulation, practitioners must recognize two major realities:

  1. Surge in localized operating costsFor example, the new regulations require an independent license, third-party auditing and insurance coverage, and the initial investment threshold is likely to exceed HK$5 million. SMEs may be forced to transform into "compliant technology service providers" to survive.
  2. Increased competition from globalizationWhen international platforms such as Coinbase and Binance access the local market through a "Hong Kong license", the traffic advantage of local exchanges will be quickly eroded. Differentiated product design and institutional client service capabilities are the key to break through.

It is worth noting that the SFC has simultaneously launched the "Virtual Asset Consultation Panel (VACP)", which is equivalent to opening up an official channel for policy lobbying. If the leading companies can get ahead of the game, they may even influence the direction of the details.

Conclusion: Is the new regulation a noose or a springboard?

The SFC's ambition is very clear: to exchange the trust of international capital for accurate regulation, and to turn Hong Kong into the "Switzerland of virtual assets". For Web3 companies, this is not only the toughest compliance test in history, but also a historical opportunity to break away from the "reckless era". New players that can quickly adapt to data monitoring, risk control upgrades, and product layering may be standing on the eve of an explosion - after all, compliance itself is the biggest market dividend in the next decade.

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