Hong Kong’s SFC Mandates Stricter Crypto Custody Rules After Global Security Incidents

The Securities and Futures Commission (SFC) of Hong Kong has introduced updated guidelines designed to strengthen the safeguarding of client assets within the cryptocurrency industry. This action is a direct response to the rising frequency of hacking incidents and security breaches affecting cryptocurrency trading platforms worldwide. The revised standards include more stringent requirements regarding the segregation of client funds from platform assets, the implementation of enhanced security protocols, and the performance of routine audits to ensure adherence. Through these adjustments, the SFC intends to mitigate risks faced by cryptocurrency investors and shield their funds from loss or theft. Furthermore, it aims to bolster investor confidence in the market and improve the overall regulation of the cryptocurrency sector in Hong Kong. Cryptocurrency custodians operating in Hong Kong must comply with these novel standards to maintain their licenses and operate lawfully. These guidelines constitute part of a broader effort by the SFC to oversee digital assets and develop a complete regulatory framework for the cryptocurrency industry.