Hong Kong’s Securities and Futures Commission (SFC) has published new rules of regulation for crypto companies providing staking services. The guidelines create a model under which licensed virtual asset trading platforms (VATPs) as well as SFC-approved funds can undertake crypto staking business in a controlled setting. The SFC recognized the possibility of staking improving the security of blockchain networks as well as enabling investors to earn returns on their virtual assets. Regulatory structure for crypto trading platforms Guidance from the SFC spells out clear specifications for licensed virtual asset trading platforms (VATPs) looking to provide staking services for their customers. Such platforms must put in place mechanisms to sufficiently avoid staking service errors. Also, the advisory states that platforms should have in place robust mechanisms to secure staked client virtual assets. This involves having proper custody arrangements and security measures to secure assets throughout the staking process. It is when they can be especially susceptible to technical or security threats. The SFC also requires VATPs to make adequate disclosure of all risks to which staked assets are exposed. The requirement for transparency ensures that investors are well aware of such issues as slashing penalties, unbonding time, or validator risks before investing their assets in staking programs. The action was announced in SFC Executive Director Christina Choi’s opening speech at the Hong Kong Web3 Festival 2025. Choi spoke during her address on how virtual assets would drive financial industry innovation. SFC Chief Executive Officer Julia Leung emphasized the importance of this action by stating, “Broadening the suite of regulated services and products is crucial to sustain the healthy advancement of Hong Kong’s virtual asset ecosystem.” SFC-approved virtual asset funds guidelines Simultaneously with the VATP regulation, the SFC has also updated its circular on approved virtual asset funds to allow them to participate in staking activities. The funds now have an evident route to be involved in staking markets. The most crucial limitation mandates the staking of these funds into virtual assets by only licensed VATPs and qualified financial institutions. This method puts the fund managers in touch solely with regulated partners instead of handling business directly from blockchain protocols or using unregistered service providers. To mitigate liquidity issues, the SFC has placed a ceiling on the proportion of assets funds can allocate towards staking activities. This restriction serves to contain liquidity risk by requiring funds to have enough unstaked assets available to satisfy prospective redemption demands from investors. The new guidelines for funds complement Hong Kong’s growing virtual asset investment ecosystem, which received a boost in April 2024 when the territory became the first jurisdiction in Asia to launch spot ETFs for Bitcoin and Ethereum. According to a study from State Street, Hong Kong’s digital asset market, as part of China’s growing ETF market, is projected to exceed $700 billion within the year and overtake Japan by size. Hong Kong’s position in Virtual Asset Regulation The staking rules are one of the more recent advances in Hong Kong’s systematic approach to virtual asset regulation. These new regulations came on the heels of the SFC’s February 2025 proposals, which were part of an overall roadmap aimed at deepening market access, enhancing regulatory protections, and broadening the types of virtual assets that may be offered under its jurisdiction. The announcement of the move in Hong Kong’s Web3 Festival 2025 signifies the region’s commitment to being a top-ranked regulated digital asset hub for Asia. The territory has been building steam for regulated digital assets since it first approved virtual asset spot ETFs last year and became the Asian region’s first jurisdiction to do so. These ETFs have attracted significant investor interest and have helped establish Hong Kong’s image as a forward-looking but prudent regulatory regime. The “ASPIRe” roadmap referred to in the SFC’s statement is the region’s blueprint for virtual asset growth, and the five pillars are targeted at different areas of ecosystem growth. The staking guidelines especially advance the pillar that pertains to expanding product and service offerings so that the region can gain a competitive edge over other financial centers which have embraced digital assets. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now