Hong Kong has implemented new crypto custody regulations, effective immediately, that include prohibitions on the use of smart contracts in cold wallets. According to the Hong Kong Securities and Futures Commission (SFC), custodians must now adhere to strict security measures, such as using certified hardware security modules, allowing withdrawals only to whitelisted addresses, and maintaining a 24/7 security operations center. Furthermore, private keys utilized for signing transactions should be air-gapped and physically secured. The goal of these rules is to minimize security risks associated with on-chain smart contracts, which have been standard practice among institutional custodians. As Hong Kong positions itself as a leading crypto hub in Asia, it continues to expand its framework for regulatory compliance, including recent approvals for licensed exchanges and developments in stablecoin legislation.

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