Hong Kong SFC Launches Margin Financing and Leverage Products for Virtual Assets

TLDR:

• SFC allows licensed brokers to offer virtual asset margin financing to qualified securities clients. 
• Professional investors can now access perpetual contracts on licensed platforms with strict safeguards. 
• Affiliated market makers permitted on platforms with conflict-of-interest mitigation requirements in place. 
• New measures aim to enhance Hong Kong’s digital asset market liquidity under ASPIRe Roadmap guidelines.

Hong Kong’s Securities and Futures Commission has introduced three key measures to enhance digital asset market liquidity.

The regulatory body now permits margin financing for virtual assets, allows perpetual contracts for professional investors, and enables affiliated market makers on licensed platforms.

These initiatives represent a calculated expansion of the territory’s digital asset ecosystem under the ASPIRe Roadmap framework.

Margin Financing and Perpetual Contracts Enter Hong Kong’s Digital Asset Market

The SFC’s new guidance permits licensed virtual asset brokers to extend margin financing services to existing securities margin clients.

This development marks a measured approach to increasing market participation among investors with established credit histories.

The framework requires brokers to maintain sufficient collateral and implement robust investor protection measures before offering these services.

Licensed virtual asset trading platforms can now develop perpetual contracts exclusively for professional investors under the commission’s newly established guidelines.

These leveraged instruments will support sophisticated risk management strategies while potentially deepening liquidity in spot markets.

The regulatory framework emphasizes transparent product design and comprehensive disclosure requirements to maintain market integrity.

The perpetual contracts framework represents the first time the SFC has outlined specific parameters for leveraged virtual asset products.

Platform operators must demonstrate clear operational controls and risk management protocols before launching these instruments.

The limitation to professional investors ensures that only those with appropriate experience and resources can access these complex financial products.

Both margin financing and perpetual contracts arrive as Hong Kong seeks to balance innovation with investor protection.

The regulatory approach maintains strict oversight while creating pathways for market growth. These measures acknowledge the evolving needs of institutional participants in digital asset markets.

Affiliated Market Makers Gain Platform Access Under Strict Safeguards

The commission now permits affiliates of licensed virtual asset trading platforms to function as market makers on their related platforms.

This policy change comes with mandatory conflict-of-interest mitigation requirements to protect market integrity. Platform operators must establish clear separation protocols between their market-making affiliates and core operations.

Market maker participation from affiliated entities provides platforms with additional liquidity sources during volatile trading periods.

The arrangement could reduce bid-ask spreads and improve price discovery for listed digital assets. However, the SFC maintains that platforms must implement comprehensive surveillance systems to monitor affiliated market maker activities.

The SFC’s Executive Director of Intermediaries addressed the strategic direction behind these regulatory changes. Dr Eric Yip stated that “our structured development approach based on the ASPIRe Roadmap is essential to scaling our digital asset market.”

He further noted that “these targeted initiatives to enhance liquidity showcase the SFC’s unswerving commitment to developing Hong Kong’s digital asset market in a sustainable and collaborative manner.”

The commission stated it will monitor these new provisions closely to ensure they contribute to a competitive market environment.

The three initiatives collectively aim to position Hong Kong as a regulated hub for digital asset trading in Asia. Market participants can now prepare compliance frameworks for these expanded service offerings.

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