Hong Kong SFC approves crypto margin lending and perpetual contracts framework

Hong Kong’s financial watchdog has issued regulatory frameworks and guidance that will let licensed brokers lend money for cryptocurrency purchases and permit professional traders to access advanced digital asset products, marking a significant step in the city’s push to become a major crypto hub.

The Securities and Futures Commission announced the changes on Wednesday. The new regulations will permit authorized brokerage firms to provide financing for virtual assets to certain customers, while also creating a legal framework for perpetual contracts, a popular type of crypto derivative.

Margin lending is limited to Bitcoin and Ether

These changes are part of what officials call the “ASPIRe” program. The letters stand for Access, Safeguards, Products, Infrastructure, and Relationships. Regulators say the current stage aims to build a market suitable for institutional players, moving past earlier efforts that centered mainly on protecting everyday consumers.

The margin lending rules allow brokers to offer financing to securities margin customers who have solid credit histories. To manage the risks that come with cryptocurrency’s price swings, only Bitcoin and Ether can be used as collateral in the beginning.

The lending framework borrows heavily from existing rules for securities margin accounts. Brokers will need to follow specific requirements in three main areas:

• Collateral Quality: Assets must be easy to sell and properly valued.
• Prudent Haircuts: Large discounts must be applied to crypto collateral values to cushion against price drops.
• Concentration Limits: Firms must avoid excessive exposure to individual customers or specific assets.

The regulator designed these crypto-specific requirements to fit within the current financial system’s oversight structure. Officials say the goal is to enable borrowing that serves a market purpose while avoiding threats to overall financial stability.

Professional investors gain access to perpetual contracts

The approval of a framework for leveraged perpetual contracts represents perhaps the biggest change. These financial products track asset prices continuously and never expire. Until now, they have been mostly available through offshore platforms operating without regulatory oversight.

By creating local rules for these instruments, the watchdog hopes to bring high-volume trading back home.

Only professional investors can access these products. The regulator chose what it calls a principles-based approach for the contracts. This puts responsibility on platforms to give clear information to users and run strong internal systems for managing risk, including tools that automatically close out losing positions.

To help build trading activity in this new market, the regulator will permit affiliates of licensed trading platforms to serve as market makers. To avoid problems where the platform benefits unfairly at customer expense, these units must operate independently and follow strict conflict-of-interest rules.

The strategy shows a clear preference for depth over breadth. Rather than allowing many different tokens, the focus stays on the two main assets, Bitcoin and Ether.

The decision to allow affiliated market makers stands out. In traditional finance, outside firms usually provide liquidity. In digital markets, exchanges often fill this role themselves. By formalizing this through independent units, regulators are essentially taking a common crypto industry practice and adding professional standards to ensure tighter price spreads and better price discovery occur without compromising fairness.

This shift also directly challenges overseas platforms. By legitimizing perpetual contracts, which rank among the most heavily traded crypto instruments, Hong Kong is pulling back capital that previously went to unregulated venues.

This could create a cycle where regulatory safety draws in institutional money, which in turn helps reduce the volatility that originally made regulators cautious.

The new measures arrive alongside other important developments in the region’s financial technology sector:

1. Stablecoin Licensing: The Monetary Authority is expected to issue its first stablecoin licenses in March, providing the settlement infrastructure needed for efficient margin operations.
2. Regulatory Clarity: Officials plan to submit a draft law covering crypto advisory services later in 2026.
3. Global Compliance: To guarantee tax reporting and international cooperation, the territory is attempting to conform to the OECD’s Crypto-Asset Reporting Framework.

Stablecoin integration, professional derivatives access, and margin lending approvals all work together to provide a comprehensive digital asset market that functions with the dependability of a conventional stock exchange.

Claim your free seat in an exclusive crypto trading community - limited to 1,000 members.