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Circular on SFC-authorised funds with exposure to virtual assets
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Jun
Jun
On 27th May 2026,the Securities and Futures Commission (SFC) published the latest circular on the updated regulatory framework under which investment funds with virtual asset (VA) exposure exceeding 10% of their net asset value (NAV) may be authorized for public offering in Hong Kong under the Securities and Futures Ordinance.
With replacing the April 2025 issued circular, the new requirements govern both direct spot VA investments and indirect exposure through exchange-traded derivatives, while explicitly excluding licensed fiat-referenced stablecoins and tokenized deposits. Operationally, fund management companies must demonstrate an unblemished compliance track record and possess dedicated, competent personnel with proven VA expertise. Eligible underlying investments are strictly confined to spot VA tokens traded on SFC-licensed virtual asset trading platforms (VATPs), and leveraged exposure at the fund level is entirely prohibited. For derivatives-based funds, positions must be limited to conventional regulated exchanges, requiring active management strategies to mitigate roll costs and ensure liquidity.
On the operational and administrative front, all spot VA transactions must be executed via licensed VATPs or authorized financial institutions (AIs). Spot VA exchange-traded funds (ETFs) are permitted to utilize both in-cash and in-kind subscription and redemption models through approved participating dealers. Custody arrangements demand institutional level of security in which assets must be segregated, primarily maintained in cold storage, and guarded by highly resilient private key architectures such as multi-signature mechanisms and key sharding with cryptographic seeds securely stored within Hong Kong. Besides,asset valuation must adopt a robust indexing approach calculated against major, high-volume trading platforms.
Furthermore, in line with the SFC’s “ASPIRe” roadmap, funds may engage in VA staking through licensed VATPs or AIs, provided they enforce rigorous risk controls and fully disclose committed NAV proportions, revenues, and operational expenses in their interim and annual reports. Lastly, fund offering documents must provide upfront, transparent risk disclosures regarding cybersecurity, forks, and roll costs, and any fund seeking to initiate or adjust its VA exposure beyond the 10% threshold must obtain prior consultation and formal approval from the SFC.
Source:https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=26EC31