‍1.  Introduction

On November 3, 2025, coinciding with the grand opening of the "Hong Kong FinTech Week," the Securities and Futures Commission of Hong Kong (hereinafter referred to as the SFC) simultaneously released two landmark regulatory circulars—the "Circular on Sharing of Liquidity by Licensed Virtual Asset Trading Platforms" and the "Circular on Expansion of Products and Services Provided by Licensed Virtual Asset Trading Platforms." The circulars indicate that, subject to compliance with regulatory requirements and prior written approval, licensed crypto asset exchanges may share order books with overseas compliant platforms to consolidate liquidity, while also expanding the range of platform products and services, including offering staking of virtual assets to professional investors. The strategic intent behind announcing this policy choice during a global gathering that attracted tens of thousands of fintech elites is unmistakable: Hong Kong is demonstrating unprecedented determination to leverage crypto assets as a key tool for consolidating its status as an international financial centre. Against the backdrop of the path outlined by the SFC's ASPIRe roadmap, this article will explore the significance of the new circulars within crypto-economic regulatory governance and discuss their potential future impact on platforms, investors, and market structure.

2.  Interpretation of the Circulars' Content

2.1  Circular on Sharing of Liquidity by Licensed Virtual Asset Trading Platforms

The "Circular on Sharing of Liquidity by Licensed Virtual Asset Trading Platforms" focuses on enhancing market liquidity under compliant premises. It primarily permits licensed Virtual Asset Trading Platforms (VATPs) to share their order books with their associated overseas platforms, merging them into a larger, deeper global liquidity pool. This aims to improve price discovery, enhance trading efficiency, and reduce cross-regional price discrepancies.

The circular emphasizes strict settlement risk management, including the use of Delivery-versus-Payment (DVP) mechanisms, daily settlement, establishing compensation arrangements, ensuring secure custody of client crypto assets, etc. It also requires platforms to formulate legally effective rules for shared order books, establish a cross-border collaborative market surveillance mechanism, and provide full disclosure of associated risks to clients (particularly retail investors) and obtain their explicit opt-in before offering this service.

Furthermore, platforms must apply to the SFC for prior approval, with corresponding terms and conditions added to their licenses. The core of this circular lies in allowing licensed Virtual Asset Trading Platform operators and eligible overseas platform operators to integrate order books, forming a shared liquidity pool for cross-platform order matching and trade execution. This mechanism mandates that platforms must adopt DVP settlement, implement intraday settlement and monitoring of unsettled trade limits, and establish in Hong Kong a reserve fund (no less than the limit's scale) along with insurance or compensation arrangements to cover settlement asset risks. Market surveillance must be implemented uniformly, with the capability to provide trading and client data to the SFC in real-time. Full risk disclosure and client opt-in confirmation are required before services are offered to retail investors.

2.2  Circular on Expansion of Products and Services Provided by Licensed Virtual Asset Trading Platforms

The "Circular on Expansion of Products and Services Provided by Licensed Virtual Asset Trading Platforms" focuses on expanding the range of products and services platforms can provide. It clarifies that "digital assets" encompass crypto assets, stablecoins, and tokenized securities, and relaxes asset inclusion requirements—for example, removing the 12-month track record requirement for crypto assets offered to Professional Investors (PIs), while also permitting stablecoins issued by licensed regulators to be offered directly to retail investors.

The circular also proposes amendments to platform licensing conditions, allowing VATPs to participate in distributing digital asset-related investment products and tokenized securities, and to provide custody services for digital assets (including tokenized securities) not traded on the platform, provided corresponding technical, security, monitoring, and anti-money laundering requirements are met. This circular emphasizes "product diversification," removing the 12-month track record requirement for crypto assets (including stablecoins) offered to Professional Investors. Stablecoins issued by licensed stablecoin issuers can even be offered to retail investors. Simultaneously, platforms can distribute tokenized securities and digital asset-related investment products under existing regulations and can custody digital assets not listed for trading for clients through associated entities.

3.  Why Issue the Circulars: Strategic Continuity and Market Response

3.1  Strategic Continuity: The ASPIRe Roadmap

The release of the two circulars is not an isolated policy move but can be seen as the concrete implementation at the institutional level of the "ASPIRe" roadmap published by the Hong Kong SFC on February 19, 2025. This roadmap, structured around five pillars—Access, Safeguards, Products, Infrastructure, and Relationships—defines the long-term regulatory direction for Hong Kong's crypto asset market.

Specifically, the "Circular on Sharing of Liquidity by Licensed Virtual Asset Trading Platforms" primarily responds to the Access pillar of the ASPIRe roadmap—aiming to strengthen Hong Kong's connectivity with overseas liquidity, enhance market efficiency, and provide Hong Kong investors with deeper/broader global liquidity. The "Circular on Expansion of Products and Services Provided by Licensed Virtual Asset Trading Platforms" responds to the Products pillar, aiming to meet the diverse needs of different investor classes while balancing risk control and investor protection.

SFC Chief Executive Officer, Ms Julia Leung, noted at relevant forums during FinTech Week that Hong Kong is evolving from an initially closed-loop ecosystem focused on investor protection built around licensed crypto asset trading platforms to "an important stage of connecting the local market to global liquidity." This arrangement allows licensed platforms and their associated overseas platforms to share a single order book, enabling local investors to tap into global liquidity while also attracting this liquidity to invest in Hong Kong's virtual asset market.

3.2  Responding to Market Liquidity Challenges

The second reason for the SFC issuing the two circulars is to address the liquidity challenges in Hong Kong's crypto market.

According to Fu Rao, Executive Director of the Hong Kong International New Economy Research Institute, Hong Kong's crypto asset market has long faced two intertwined practical issues: firstly, low trading volumes and thin order books on local platforms, where many tokens have visible prices but no trades can be matched; secondly, occasional price discrepancies between domestic and overseas markets, with the same asset often showing noticeable price differences and slippage between Hong Kong and major overseas platforms. This affects investor experience and undermines Hong Kong's credibility as a pricing hub. The design of the shared liquidity mechanism in the circulars is precisely an institutional response to this pain point—by selectively "bringing in" overseas compliant liquidity, it addresses the twin challenges of insufficient liquidity and price discrepancies through a regulatory framework rather than mere market spontaneity. For the Hong Kong market, price discovery is no longer confined to a small local pool but, under a regulated mechanism, connects to global mainstream liquidity pools, naturally narrowing price discrepancies and bringing trading volumes closer to global realistic levels.

Examining at a deeper level, the release of these dual circulars marks a shift in Hong Kong's crypto asset regulation from "gatekeeping" to "enabling": the new rules no longer merely set limits but proactively pave a compliant path for institutional participation in crypto asset activities; they not only block risks but also strive to channel innovation, bringing grey areas into the regulatory framework. According to Fu Rao's perspective, Hong Kong's regulation has never been about simple permission but about conditional opening under controllable risks. Several red lines are clearly visible in the design of the shared order book mechanism: cooperation only with licensed institutions, data sharing only within a regulatory framework, asset synchronization only under the core settlement logic of "Delivery-versus-Payment (DVP)"... This locks the legal, technical, and counterparty risks potentially brought by cross-border cooperation into a verifiable, accountable regulatory closed loop.

4.  Impact on Hong Kong's Crypto Market

4.1  Rebuilding Trust as a Digital Asset Hub

From a regulatory perspective, the release of the dual circulars embodies Hong Kong's core regulatory principle of "same business, same risks, same rules." Dr. Arthur Yip, Executive Director of Intermediaries at the SFC, emphasized that the new roadmap upholds the core principles of investor protection, sustainable liquidity, and flexible regulation, precisely responding to the challenges of the emerging crypto asset market.

It is worth noting that besides promoting market development, the SFC also emphasizes strict risk control requirements in the dual circulars. The shared liquidity mechanism requires that overseas associated platforms must already have a regulatory framework aligned with FATF recommendations and IOSCO crypto asset policy suggestions and be subject to ongoing supervision by local regulators; regarding settlement mechanisms, requirements include full prepayment, Delivery-versus-Payment, intraday settlement, etc.; regarding investor protection, establishing a client compensation reserve fund and insurance arrangements are mandated.

Simultaneously, the SFC continues to strengthen anti-money laundering (AML) supervision. An important circular released on November 17, 2025, urges licensed corporations and crypto asset trading platforms to remain vigilant against suspicious fund transfers showing signs of layering activities to prevent money laundering. It also establishes a "24/7 stop-payment" mechanism in coordination with the police, comprehensively enhancing the detection and prevention capabilities for virtual asset-related crimes.

4.2  Shaping an Investment Landscape of Both Opportunities and Challenges

For platforms and practitioners, the primary benefit brought by the dual circulars is the significant expansion of business development space. The product expansion circular enables platforms to quickly list emerging tokens and stablecoins, distribute tokenized securities and digital asset products, and develop custody businesses. The shared liquidity circular helps enhance trading depth and efficiency, improving user experience.

The increase in compliance costs is also an undeniable challenge. Participating in shared liquidity requires establishing complex cross-border settlement systems, unified market surveillance plans, reserve fund mechanisms, etc. This places higher demands on platforms' technical capabilities, financial strength, and compliance levels.

From an industry ecosystem perspective, Hong Kong's cryptocurrency industry in 2025 shows a clear trend of integration. Traditional financial institutions are actively embracing crypto businesses, with over 40 brokerage firms, 35 fund companies, and 10 large banks involved in crypto asset businesses. The clash and fusion of three cultures—Crypto Native culture, internet finance culture, and traditional finance culture—are shaping the unique ecosystem of Hong Kong's crypto industry.

5.  Summary and Outlook

The release of the SFC's dual circulars marks a new stage in Hong Kong's crypto asset regulation. This is not only an institutional response to local market liquidity challenges but also a strategic move for Hong Kong to seize a regulatory high ground in the global digital asset competition landscape.

On one hand, the SFC and the Hong Kong Monetary Authority (HKMA) are promoting the deep integration of traditional finance and blockchain technology. The HKMA's announced "Fintech 2030" vision aims to promote financial tokenization, taking the lead in demonstrating asset tokenization. The e-HKD pilot project is also progressing, focusing on three application scenarios: tokenized asset settlement, programmable payments, and offline payments. On the other hand, from a global perspective, the regulatory frameworks of markets like Hong Kong, Singapore, and the UAE are increasingly converging. The EU's MiCA regulation, Dubai's VARA regime, and Hong Kong's VASP licensing regime are becoming closer in core principles, all emphasizing investor protection, AML compliance, and market integrity. By aligning with international standards, Hong Kong is poised to play a more important bridging role in global digital asset regulatory coordination.

Looking ahead, with the continuous expansion of products and services, accelerated development of the stablecoin ecosystem, and deepening integration between traditional finance and Web3, Hong Kong has the potential to truly become a global digital asset hub connecting East and West. As Dr. Arthur Yip of the SFC stated: "Hong Kong has grown from a small fishing village into today's world-leading financial centre. We have the capability to achieve equivalent success in the virtual asset market."