This article will explore the significance of the new circulars released in the context of the path outlined by the SFC's ASPIRe roadmap for the regulation and governance of the crypto economy.

Written by: Fintax

1. Introduction

On November 3, 2025, coinciding with the grand event of "Hong Kong FinTech Week," the Hong Kong Securities and Futures Commission (hereinafter referred to as SFC) simultaneously released two milestone regulatory circulars—"Circular on the Sharing of Liquidity by Crypto Asset Trading Platforms" and "Circular on the Expansion of Products and Services of Crypto Asset Trading Platforms." The circulars state that, provided they meet regulatory requirements and obtain prior written approval, licensed crypto asset exchanges may share order books with compliant overseas platforms to integrate liquidity while expanding the range of products and services offered by the platform, including providing short-term virtual assets to professional investors. The strategic intent of this policy choice is evident, announced during a gathering of tens of thousands of fintech elites from around the world: Hong Kong is demonstrating unprecedented determination to leverage crypto assets as a key tool to solidify its status as an international financial center. This article will discuss the significance of the new circulars in the regulation and governance of the crypto economy, as well as their potential impact on platforms, investors, and market structure in the future.

2. Interpretation of the Circulars

2.1 "Circular on the Sharing of Liquidity by Crypto Asset Trading Platforms"

The "Circular on the Sharing of Liquidity by Crypto Asset Trading Platforms" focuses on enhancing market liquidity under compliance, primarily allowing licensed virtual asset trading platforms (VATPs) to share order books with their overseas affiliated platforms to merge into a larger, deeper global liquidity pool, thereby improving price discovery, enhancing trading efficiency, and reducing cross-regional price differences.

The circular emphasizes strict settlement risk management, including the adoption of a Delivery-versus-Payment (DVP) mechanism, daily settlement, the establishment of compensation mechanisms, and ensuring the secure custody of clients' crypto assets. It also requires platforms to formulate legally binding rules for sharing order books, establish a cross-border market surveillance mechanism, and fully disclose relevant risks to clients (especially retail investors) before providing this service, obtaining their explicit choice to participate.

Additionally, platforms must apply for approval from the SFC in advance and include corresponding terms and conditions in their licenses. The core of this circular lies in allowing licensed virtual asset trading platform operators to integrate order books with qualified overseas platform operators, forming a shared liquidity pool to facilitate cross-platform trading and execution. This mechanism requires platforms to adopt DVP settlement methods, implement intraday settlement and monitoring of unsettled transaction limits, and establish a reserve fund and insurance or compensation arrangements in Hong Kong to cover settlement asset risks. Market surveillance must be uniformly implemented and can provide transaction and client data to the SFC in real-time, with full risk disclosure to retail investors and confirmation of their choice to participate.

2.2 "Circular on the Expansion of Products and Services of Crypto Asset Trading Platforms"

The "Circular on the Expansion of Products and Services of Crypto Asset Trading Platforms" focuses on expanding the range of products and services that platforms can offer, clarifying that "digital assets" encompass crypto assets, stablecoins, and tokenized securities, while relaxing asset inclusion requirements, such as removing the 12-month track record requirement for professional investors (PIs) regarding crypto assets and allowing licensed stablecoins to be issued directly to retail investors.

The circular also proposes to amend the licensing conditions for platforms, allowing VATPs to participate in the distribution of investment products related to digital assets and tokenized securities, and to provide custody services for digital assets (including tokenized securities) that are not traded on the platform, as long as they meet the relevant technical, security, monitoring, and anti-money laundering requirements. This circular emphasizes "product diversification," removing the requirement for a 12-month track record for crypto assets (including stablecoins) sold to professional investors, while licensed stablecoin issuers can sell stablecoins to retail investors. Additionally, platforms can distribute tokenized securities and investment products related to digital assets, and provide custody for digital assets that are not yet listed for trading through affiliated entities, provided they comply with existing regulations.

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

3.1 Strategic Continuation of the ASPIRe Roadmap

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

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

SFC's Chief Executive Officer, Ashley Alder, pointed out at a forum during FinTech Week that Hong Kong is gradually evolving from an initially closed-loop ecosystem centered on investor protection and licensed crypto asset trading platforms to "a crucial stage of connecting the local market with global liquidity." This arrangement allows licensed platforms to share a single order book with affiliated overseas platforms, enabling local investors to utilize global liquidity while attracting this liquidity to the Hong Kong virtual asset market.

ASPIRe Roadmap Diagram (Source: Hong Kong SFC)

3.2 Responding to Market Liquidity Challenges

The second reason for the SFC's release of the two circulars is to address the liquidity challenges faced by the Hong Kong crypto market.

According to Fu Rao, Executive Director of the Hong Kong International New Economy Research Institute, the Hong Kong crypto asset market has long faced two intertwined realities: first, local platforms experience low trading volumes and thin order books, with many tokens having visible prices but failing to facilitate trades; second, there are often price discrepancies between domestic and foreign markets, with significant price differences and slippage frequently occurring for the same asset between Hong Kong and large overseas platforms. This not only affects the investor experience but also undermines Hong Kong's credibility as a pricing hub. The design of the shared liquidity mechanism in the circulars is a systematic response to this pain point—by selectively "bringing in" compliant overseas liquidity, it addresses the dual challenges of insufficient liquidity and price differences through a regulatory framework rather than purely spontaneous market behavior. For the Hong Kong market, price discovery is no longer limited to a small local pool but connects to mainstream global liquidity pools under a regulated mechanism, naturally narrowing price differences and bringing transactions closer to global real levels.

From a deeper perspective, the release of these two circulars marks a shift in Hong Kong's crypto asset regulation from "gatekeeping" to "empowerment": the new regulations are no longer merely restrictive but actively pave the way for institutional participation in crypto asset activities; they not only block risks but also aim to channel innovation, bringing gray areas into the regulatory framework. According to Fu Rao, Hong Kong's regulation has never been about simple approval but conditionally opening the gates under the premise of controllable risks. The design of the shared order book mechanism clearly outlines several red lines: only cooperating with licensed institutions, sharing data only within a regulated framework, and synchronizing assets under the core requirement of the Delivery-versus-Payment (DvP) settlement logic… This locks in the legal, technical, and counterparty risks that cross-border cooperation may bring into a verifiable and accountable regulatory loop.

4. Impact on the Hong Kong Crypto Market

4.1 Rebuilding Trust in the Digital Asset Hub

From a regulatory perspective, the release of the two circulars reflects Hong Kong's core regulatory principle of "same business, same risk, same rules." Dr. Yip Chi-hang, Executive Director of the SFC's Intermediaries Division, emphasized that the new roadmap adheres to the core principles of investor protection, sustainable liquidity, and flexible regulation, precisely responding to the challenges of the emerging crypto asset market.

It is noteworthy that the SFC, in addition to promoting market development through the two circulars, also emphasizes strict risk control requirements. The shared liquidity mechanism requires that overseas affiliated platforms must have established a regulatory framework aligned with FATF recommendations and IOSCO's crypto asset policy recommendations, and be subject to ongoing supervision by local regulatory authorities; in terms of settlement mechanisms, it requires full prepayment, DVP, and intraday settlement measures; in terms of investor protection, it requires the establishment of customer compensation reserve funds and insurance arrangements.

At the same time, the SFC continues to strengthen anti-money laundering regulation. An important circular released on November 17, 2025, urges licensed corporations and crypto asset trading platforms to remain vigilant against suspicious fund transfers that show signs of layered trading activities to prevent money laundering. It also collaborates with the police to establish a "24/7 stop payment" mechanism to comprehensively enhance the detection and prevention capabilities against virtual asset crimes.

4.2 Shaping an Investment Landscape of Opportunities and Challenges

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

The increase in compliance costs is also a challenge that cannot be ignored. Participating in shared liquidity requires the establishment of 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, the Hong Kong cryptocurrency industry in 2025 shows a clear trend of integration. Traditional financial institutions are actively embracing crypto business, with over 40 brokerages, 35 fund companies, and 10 large banks involved in crypto asset business. The tearing and integration of three cultures—Crypto Native culture, Internet finance culture, and traditional finance culture—are shaping a unique ecosystem for Hong Kong's crypto industry.

5. Conclusion and Outlook

The release of the SFC's two circulars marks the beginning of a new phase in Hong Kong's crypto asset regulation. This is not only a systematic response to the local market's liquidity challenges but also a strategic move for Hong Kong to seize institutional advantages in the global digital asset competitive landscape.

On one hand, the SFC and the Monetary Authority are promoting the deep integration of traditional finance and blockchain technology. The "FinTech 2030" vision announced by the Monetary Authority will promote financial tokenization, leading the way in asset tokenization demonstrations. The e-HKD pilot program is also being continuously advanced, focusing on three major application scenarios: tokenized asset settlement, programmable payments, and offline payments; on the other hand, from a global perspective, the regulatory frameworks of markets such as Hong Kong, Singapore, and the UAE are increasingly converging. The EU's MiCA legislation, Dubai's VARA system, and Hong Kong's VASP licensing system are becoming increasingly aligned in core principles, all emphasizing investor protection, anti-money laundering compliance, and market integrity. By aligning with international standards, Hong Kong is expected to play a more significant bridging role in global digital asset regulatory coordination.

Looking ahead, as product services continue to expand, the stablecoin ecosystem accelerates development, and traditional finance deeply integrates with Web3, Hong Kong is poised to truly become a global digital asset hub connecting the East and West. As Dr. Yip Chi-hang of the SFC stated, "Hong Kong has developed from a small fishing village into a leading financial center in the world; we have the capability to achieve the same success in the virtual asset market."

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