On November 3, 2025, the Hong Kong Securities and Futures Commission (SFC) issued two important circulars on the same day: the "Circular on Expanding Products and Services of Virtual Asset Trading Platforms" and the "Circular on Liquidity Sharing Among Virtual Asset Trading Platforms." These documents not only represent a significant evolution in Hong Kong's virtual asset regulatory regime but also constitute a strategic move for Hong Kong to seize the institutional high ground in the global digital asset competitive landscape and promote the steady development of the industry. This article will systematically interpret the core essence and far-reaching impacts of these two circulars from the perspectives of their content, background, policy comparison, business implications, and future outlook.

I. Overview of the Core Content of the Two Circulars

Product Expansion Circular: Promoting Product Diversification and Expanding Business Boundaries

The "Circular on Expanding Products and Services of Virtual Asset Trading Platforms" primarily focuses on "product diversification," with core content covering three aspects:

First, relaxing token inclusion requirements. The requirement for a 12-month track record has been abolished for virtual assets (including stablecoins) offered to professional investors. Stablecoins issued by licensed stablecoin issuers are also exempt from this requirement and can be offered to retail investors. This move significantly lowers the listing threshold for emerging tokens, helping platforms respond quickly to market changes and introduce more innovative assets. However, other virtual assets offered to retail investors still need to meet the 12-month track record requirement, reflecting the regulator's balance between encouraging innovation and protecting investors.

Second, explicitly allowing platforms to distribute digital asset-related products and tokenized securities. Licensed platforms, subject to existing regulations, can distribute digital asset-related investment products, including tokenized securities, and can open trust or client accounts for holding related assets on behalf of clients. This means platforms are no longer merely trading venues but can transform into comprehensive financial service providers, further enriching their business models.

Third, allowing platforms to provide custody services for digital assets not traded on their platforms. Platforms can custody digital assets not listed for trading through associated entities, but must comply with strict due diligence and risk control requirements. This regulation expands platforms' revenue sources and provides users with more comprehensive asset management solutions.

Liquidity Sharing Circular: Building Cross-Border Liquidity Pools to Enhance Market Efficiency

The "Circular on Liquidity Sharing Among Virtual Asset Trading Platforms" focuses on "liquidity integration," aiming to allow licensed platforms and their overseas affiliated platforms to integrate their order books, form shared liquidity pools, and achieve cross-platform trade matching and execution. This circular sets out systematic regulatory requirements for the operation of liquidity sharing:

First, the cooperating parties must be compliant overseas platforms, and their jurisdictions must have a regulatory framework consistent with international standards.

Second, a Delivery versus Payment settlement mechanism must be established, along with a reserve fund to address settlement risks and real-time monitoring.

Third, a unified market surveillance program must be established to prevent cross-border market misconduct.

Fourth, platforms must bear all trading responsibilities and fully disclose relevant risks to clients.

These provisions encourage platforms to enhance trading depth and efficiency through liquidity sharing while emphasizing the importance of risk isolation and investor protection.

II. Deep-Seated Background of the Circulars' Issuance

Aligning with International Standards, Enhancing Institutional Competitiveness

In recent years, the global virtual asset regulatory system has accelerated. International bodies such as the Financial Action Task Force and the International Organization of Securities Commissions have introduced several standard recommendations, emphasizing regulatory consistency, investor protection, and risk prevention. Hong Kong's move is a proactive response to the international regulatory consensus, aiming to enhance the compatibility of its regulatory regime with international standards and strengthen international competitiveness. Especially against the backdrop of Singapore, Dubai, the EU, and other jurisdictions successively introducing virtual asset regulatory frameworks, Hong Kong urgently needs to maintain a leading position at the institutional level to attract global capital and talent.

Consolidating Financial Center Status with Digital Assets

Virtual assets are a key track for Hong Kong to consolidate its status as an international financial center and develop its digital economy. The "ASPIRe Roadmap" released in February 2025 explicitly proposes "Products" and "Connectivity" as the two pillars to drive the development of the digital asset ecosystem. These circulars are the concrete implementation of this roadmap at the policy level, reflecting Hong Kong's policy orientation of encouraging innovation and expanding market depth under controllable risks. Hong Kong aims to leverage institutional advantages to build a "Digital Asset Hub" and gain first-mover advantages in areas such as asset tokenization, cross-border settlement, and digital securities.

Addressing Homogeneous Competition, Enhancing Comprehensive Competitiveness

Currently, Hong Kong's virtual asset trading platforms face issues such as product homogeneity, fragmented liquidity, and increasing competitive pressure from international platforms. Relaxing product scope and introducing a liquidity sharing mechanism will help enhance the comprehensive service capabilities and market efficiency of local platforms, narrowing the gap with global mainstream platforms. Especially in terms of trading depth, asset variety, and user experience, Hong Kong platforms urgently need to achieve leapfrog development through institutional innovation.

III. Comparison of Similarities and Differences Between the Two Circulars

Similarities: Pursuing Progress while Ensuring Stability, Balancing Development and Risk

Both circulars share the dual objectives of "promoting market development and preventing financial risks," reflecting the SFC's regulatory approach of "pursuing progress while ensuring stability." They are both important steps in the refinement and systematization of Hong Kong's virtual asset regulatory regime, aiming to enhance market vitality and investor confidence. In terms of regulatory methodology, both emphasize compliance baselines, requiring platforms to strengthen risk control, information disclosure, and investor protection while expanding their businesses.

Differences: Dual Drivers of Product Innovation and Market Infrastructure

The "Product Expansion Circular" focuses on "product innovation," expanding platforms' business boundaries and revenue sources by relaxing token access, allowing distribution and custody of diversified assets. The "Liquidity Sharing Circular" focuses on "market infrastructure," enhancing trading efficiency, optimizing price discovery, and strengthening the global attractiveness of the Hong Kong market through liquidity integration.

In short, the former addresses the question of "what can be traded," while the latter addresses "how to trade more efficiently." The two complement each other, jointly forming the twin engines for the development of Hong Kong's virtual asset market.

IV. Impact on Platform Operations

Short-Term: Coexistence of Opportunities and Challenges

In the short term, licensed platforms will face business expansion opportunities. The "Product Expansion Circular" enables platforms to quickly list emerging tokens and stablecoins, distribute tokenized securities and digital asset products, and explore the custody service market. The "Liquidity Sharing Circular" allows platforms to access global liquidity, enhancing trading depth and client experience.

However, platforms also face the challenge of rising compliance costs. They need to strengthen due diligence, risk control, system construction, and information disclosure, especially in cross-border settlement, market surveillance, and client asset protection, requiring corresponding resources to meet regulatory requirements. Small and medium-sized platforms that cannot bear these costs may face the risk of being eliminated or consolidated.

Medium to Long-Term: Reshaping the Market Structure

In the medium to long term, these two policies will reshape the market structure. The enhancement of products and service capabilities will attract more institutional and retail investors, expanding the market size. Liquidity integration will accelerate differentiation among platforms, with those having technological and risk control advantages standing out. Hong Kong is expected to become an Asian hub for digital asset product innovation and cross-border trading, enhancing its nodal value in the global digital financial network.

V. Outlook for Hong Kong's Digital Asset Development and Regulation

The issuance of these two circulars marks a new stage in Hong Kong's virtual asset regulation, moving from "prudent access" to "precision development." The SFC is not only aligning its system internationally but also demonstrating foresight and systematic design in its policy approach.

In the future, Hong Kong may continue to deepen its efforts in the following areas:

• Gradually bringing more types of digital assets under regulatory purview, such as RWA and DeFi protocols.

• Promoting cross-border regulatory cooperation and establishing multilateral mutual recognition mechanisms to enhance international coordination efficiency.

• Exploring the application of Central Bank Digital Currencies in virtual asset trading to improve settlement efficiency and security.

• Strengthening technology regulatory capabilities, utilizing tools like blockchain analysis and AI monitoring to enhance enforcement effectiveness.

The SFC's issuance of these two circulars is both a timely response to market development needs and a strategic move to layout the future of digital finance. Under the premise of ensuring market stability, Hong Kong is steadily advancing towards building an internationally competitive digital asset ecosystem through the dual drivers of "liberalizing products and connecting liquidity." For market participants, only by grasping policy dividends and solidifying compliance foundations can they navigate this wave steadily and go the distance.