Hong Kong's Securities and Futures Commission Allows Licensed Virtual Asset Brokers to Provide Margin Financing

BlockBeats News, February 11th, Hong Kong's Securities and Futures Commission (SFC) today issued new guidance allowing licensed brokers engaging in the provision of virtual asset trading services (virtual asset brokers) to expand their scope of services to include margin financing, while establishing a high-level framework to provide guidance to virtual asset trading platforms to assist them in proposing leveraged products involving virtual assets to professional investors.

The SFC is expanding the diversity of products and services in line with its ASPIRe roadmap. As one of the latest measures, the SFC now allows virtual asset brokers to offer virtual asset financing services to their securities margin clients, subject to adequate collateral and robust investor protection measures. This move is expected to encourage margin clients with sound credit and collateral positions to more actively participate in virtual asset trading, thereby enhancing market liquidity in Hong Kong within a risk-managed framework.

For licensed virtual asset trading platforms, the SFC has, for the first time, established a high-level framework to guide them in developing perpetual contracts that are leveraged products intended solely for professional investors. This is aimed at helping investors implement risk management strategies and improve the liquidity of the underlying assets in the spot market. To ensure investor protection, the framework outlines the high transparency product design, clear disclosure requirements, and robust operational monitoring measures that these leveraged products must adhere to.

To further drive virtual asset trading activities in Hong Kong, the SFC allows affiliates of licensed virtual asset trading platforms to act as market makers on their platforms, subject to strong safeguards to mitigate conflicts of interest. The participation of these affiliate companies is expected to bring additional liquidity channels to licensed virtual asset trading platforms.

Dr. Thomas Atkinson, Executive Director of the intermediaries division of the SFC, stated: "The SFC pursues a gradual approach to development in line with the ASPIRe roadmap, which is crucial for the scaling of Hong Kong's digital asset market. These targeted measures aim to enhance market liquidity and demonstrate the SFC's firm commitment to developing the Hong Kong digital asset market in a sustainable and collaborative manner."

The SFC will continue to closely monitor the implementation of these measures and engage with stakeholders to ensure that they facilitate the establishment of a secure and competitive market environment in Hong Kong.