Hong Kong SFC Tightens Crypto Custody Rules After Global Security Incidents

Hong Kong’s Securities and Futures Commission (SFC) has introduced stricter crypto custody requirements following a string of high-profile security breaches at exchanges and custodians worldwide. The measures are designed to strengthen investor protection and reinforce confidence in the city’s digital asset sector.

Under the new framework, licensed virtual asset trading platforms must segregate client assets from company holdings, keep at least 98% of customer tokens in cold storage, and undergo quarterly audits by independent firms. Operators will also need to implement multi-signature withdrawal protocols and establish enhanced oversight for all client fund transfers.

The announcement comes after several global incidents in which billions of dollars in cryptocurrency were stolen, including a $320 million breach of a major Asian exchange in June. The SFC said such events highlight the need for robust, enforceable custody safeguards to prevent similar losses in the future.

“Custody remains the single most critical point of failure for digital assets,” said Jason Lau, chief security officer at OKX. “Hong Kong’s approach aligns with emerging global best practices and will likely influence similar regulations in other jurisdictions.”

Analysts noted that while the compliance burden for exchanges will rise, stronger rules could ultimately attract larger institutional players, as long-term market confidence depends heavily on transparent and secure asset management practices. “Stronger custody standards reduce counterparty risk, which is a prerequisite for many large financial institutions considering digital asset exposure,” said Angela Wong, fintech policy researcher at the University of Hong Kong.

Following the announcement, bitcoin (BTC) traded at $72,180, up 0.4% in the past 24 hours, while ether (ETH) held at $3,820 with minimal change. The total crypto market capitalization stood at $3.18 trillion, according to CoinMarketCap data.

Market participants expect the SFC to introduce further investor protection measures in the months ahead, including stricter onboarding checks and mandatory insurance coverage for custodial holdings. As global regulators search for ways to safeguard decentralized assets without stifling innovation, Hong Kong’s updated custody framework could serve as a benchmark for balancing market growth with security.