Hong Kong's Securities and Futures Commission (SFC) has implemented stricter custody standards for licensed virtual asset trading platforms (VATPs) to enhance the security of client assets. The new requirements include mandatory use of cold wallets, air-gapped hardware, rigorous oversight over third-party wallet providers, and strict whitelisting controls. These measures come amid an increase in cybersecurity incidents affecting centralized platforms abroad, resulting in significant client losses. The SFC's approach aims to foster a more competitive and trusted digital asset ecosystem. The new standards are part of a broader regulatory roadmap for digital assets, which also includes a licensing regime for custodians handling client assets. Operators are required to maintain constant security monitoring, ensure systematic transaction verification, and provide comprehensive staff training to mitigate risks associated with asset custody. The SFC will also be conducting a public consultation regarding these regulations and is expected to finalize the bill shortly after receiving feedback.

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