Written by: Qi Xiao Xin

The Hong Kong Securities and Futures Commission officially announced a new regulatory framework on April 20, 2026, aimed at promoting the trading of tokenized investment products recognized by the Securities and Futures Commission (referred to as "tokenized products") in the secondary market in Hong Kong. This initiative is considered an important milestone in building a digital asset ecosystem in Hong Kong.

Since the establishment of the regulatory framework related to tokenization at the end of 2023, the total asset value of tokenized products in the Hong Kong market has grown to HKD 10.7 billion. To further enhance the market's scalability and liquidity, the Securities and Futures Commission believes that promoting around-the-clock trading in the secondary market is timely. The core purpose of this document is to facilitate the trading of tokenized open-end funds (the first batch is expected to be money market funds) on licensed virtual asset trading platforms, and to allow for settlement using regulated stablecoins and tokenized deposits, thereby breaking the traditional time constraints of trading and enabling "all-weather" trading during nights and weekends.

Core Regulatory Rules and Operational Mechanisms

While opening up trading, the new framework establishes a strict regulatory and operational system covering multiple dimensions such as trading channels, fair pricing, liquidity provision, and application processes.

Regarding trading channels and investor access, the document clearly states that retail investors can conduct secondary market trading of tokenized products through licensed virtual asset trading platforms (i.e., trades that are matched automatically on screens). Platform operators must implement strict funds and position checks and only execute trades when there are sufficient funds in the customer accounts or equivalent products with interchangeable trading positions. In addition, although the main channel is licensed platforms, the Securities and Futures Commission has also stated that it will consider allowing arrangements for over-the-counter secondary market trading on a case-by-case basis.

In terms of fair pricing and investor protection, to prevent prices from deviating significantly from the net asset value, licensed platforms must implement effective risk management measures. Specific requirements include: when the proposed transaction price significantly deviates from the real-time or near-real-time indicative net asset value per unit of the product, a price deviation warning must be issued to investors; at the same time, platforms need to inform investors that they have the option to subscribe or redeem in the primary market, rather than being limited to secondary market trading. Additionally, platforms must implement systematic monitoring measures such as trading volatility limits and cooling-off periods to prevent excessive price fluctuations and market manipulation.

Regarding liquidity assurance and market maker systems, product providers should make every effort to ensure that each tokenized product has at least one market maker, and that market makers must give no less than three months' prior notice before terminating services. Product providers need to maintain close communication with market makers and establish contingency plans. Licensed trading platforms must conduct due diligence on market makers to ensure they continue to meet standards in terms of bid-ask spreads, quote value, quote maintenance time, and participation rates.

In terms of infrastructure and application processes, the operation of this mechanism relies on infrastructures promoted by the Hong Kong Monetary Authority, such as the "Ensemble Project," which supports tokenized deposits and regulated stablecoins. The document emphasizes that for new investment products intended to have tokenization features or existing products that intend to introduce tokenization features, providers must consult the Securities and Futures Commission in advance and obtain approval.

Market Impact and Industry Significance

The release of this policy has profound and specific impacts on the digital asset market in Hong Kong and even globally.

This policy greatly enhances capital efficiency and liquidity. By allowing around-the-clock trading, investors are no longer constrained by traditional stock market opening hours; idle funds can earn returns through tokenized money market funds over the weekend or at night, and can respond to market fluctuations at any time. This is highly attractive for retail and institutional investors seeking high liquidity.

It also promotes deep integration of traditional finance and Web3. This framework draws on the mature experiences of exchange-traded funds (ETFs) and licensed virtual asset trading platforms, combining the compliance of traditional securities (such as those recognized by the Securities and Futures Commission) with the technical advantages of digital assets (such as blockchain settlement and programmability). This not only provides traditional institutions like banks and fund companies with low-cost, efficient issuance and distribution channels, but also introduces compliant mainstream asset supply to the Web3 industry.

The circular issued by the Hong Kong Securities and Futures Commission regarding the secondary market trading of tokenized investment products effectively paves the last mile from "issuance" to "circulation" for tokenized assets.

It not only addresses the long-standing liquidity pain points faced by tokenized products from a policy framework but also establishes a safe, efficient, and transparent trading environment by introducing around-the-clock trading mechanisms and strict investor protection measures.

With the first batch of tokenized money market funds expected to be listed in the secondary market soon, along with the implementation of regulations related to stablecoins, we have reason to expect that this policy will accelerate the improvement of Hong Kong's digital financial infrastructure, promote the expansion of tokenized assets into more asset classes such as bonds and precious metals, and inject new digital vitality into Hong Kong's status as an international financial center.

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