SFC allows intermediaries to provide VA staking services and VA funds to allow subscriptions/redemptions in-kind

On 30 September 2025, the Securities and Futures Commission of Hong Kong (“SFC”) and the Hong Kong Monetary Authority (“HKMA”) jointly issued the Supplemental joint circular on intermediaries’ virtual asset-related activities (“Supplemental Circular”), which (1) summarised the amendments made to the Appendix 6 T&C¹ issued in October 2023 and (2) clarified some regulatory requirements for intermediaries conducting virtual asset (“VA”)-related activities.

VA staking services²

First and foremost, intermediaries are now allowed to provide VA staking services to their clients, subject to (among the other terms to be complied with, such as record keeping) the following conditions set out in the amended Appendix 6 T&C:

• VA staking services must only be provided: 

1. 1. to clients for whom the intermediaries are dealing in VA; 
   2. through segregated account(s) maintained with an SFC-licensed platform or an authorised financial institution (or a subsidiary of a locally incorporated authorised financial institution) (together, “Authorised Service Providers”), which has obtained the necessary approval from the SFC/HKMA; and
   3. in accordance with the client’s standing authority; 

• when providing VA staking services, intermediaries must:

1. 1. maintain relevant VA staking contingency plans³; and
   2. obtain a VA staking risk acknowledgment executed by the client⁴;
   3. disclose to their clients:

• • • specific VA for which such services are provided and any 3rd parties involved⁵;
    • the risks⁶ that clients may be exposed to in using VA staking services, 
    • participation requirements, returns details⁷, staking amount limitations, minimum lock up periods and unstaking process and length;
    • relevant fees and charges⁸ and their calculation methods; and
    • manner⁹ in which losses relating to the risks mentioned in sub-paragraph (ii) above will be dealt with; and

• when planning to cease or suspend VA staking services, intermediaries must:

1. 1. take due account of the best interests of their clients; and
   2. disclose all relevant material information¹⁰ in relation to the termination of the services to all clients in an appropriate and timely manner.

Additionally, intermediaries should also take note of the SFC’s requirements on staking for licensed platforms¹¹ and authorised VA funds¹², and the HKMA’s issued guidance on the provision of staking services¹³.

Use of off-platform VA trading services  

In light of the removal of clause 4.2 of the Appendix 6 T&C, intermediaries are now allowed to execute a trade via the off-platform VA trading services of SFC-licensed platforms.

VA transactions that do not constitute VA dealing services 

Notably, the Circular has confirmed that the following activities will not constitute VA dealing services:

1. use of VA for subscribing and redeeming investment products, or 
2. in-kind subscriptions and redemptions of VA funds. 

Nonetheless, when handling these VA transactions, intermediaries should still 

1. notify in advance the SFC (and the HKMA where appropriate), 
2. hold VA in accounts established/maintained with Authorised Service Providers¹⁴, and 
3. maintain strict compliance with the applicable anti-money laundering requirements¹⁵. 

Exemptions for institutional / qualified corporate profession investors (“PI”) clients

Importantly, the Supplemental Circular has made the following clarifications to the applicability of certain existing requirements under the Joint Circular:

Net worth requirement (paragraph 6.2 of the Joint Circular)

While intermediaries are generally required to ensure that their clients have sufficient net worth when distributing VA-related products, the Supplemental Circular clearly states that such net worth requirement does not apply to clients who are institutional / qualified corporate PI.

Risk statement requirement (paragraph 13 of the Joint Circular)

The requirement for intermediaries to provide risk disclosure statements specific to VA futures contracts also does not apply to clients who are institutional / qualified corporate PI.

Notification obligations 

Lastly, the Supplemental Circular requires intermediaries to notify the SFC (and the HKMA, where applicable) before implementing the following changes to their VA-related activities: 

• The type(s) of clientele served;
• The introduction of:

1. 1. deposit / withdrawal of VA from the intermediaries’ accounts;
   2. staking services;
   3. subscription / redemption using VA; and

• Other material changes or adjustments made to the above activities

What this means for the VA regulatory regime in HK

The SFC has taken a significant step forward in maturing HK’s VA framework with Supplemental Circular, which permits intermediaries to offer VA staking services and leverage off-platform trading. This move is particularly timely for the Hong Kong crypto ecosystem, as it addresses a key gap in the market: staking, a core feature of proof-of-stake (PoS) blockchains like Ethereum, Cardano, and Solana, which has been largely restricted under prior rules. 

By allowing licensed intermediaries to provide these services through segregated accounts with SFC-approved providers, the regime not only unlocks new revenue streams for firms but also enhances investor access to yield-generating opportunities, potentially drawing in more institutional capital from Asia and beyond. This builds on Hong Kong's existing VA licensing and positions the city as a balanced alternative to more permissive jurisdictions like Dubai or Singapore, where staking has been more freely available but sometimes with less stringent oversight.  

Another fundamental development is the clarification that in-kind (VA) subscriptions and redemptions for VA funds do not amount to VA “dealing” services.  This is important in the context of existing Type 9 (VA uplifted) managers, as the SFC has previously made it clear that the VA management licence does not allow for incidental VA “dealing” activities to be carried out (unlike the tradfi Type 9 licence for securities).  This had meant that Type 9 (VA uplifted) managers could not allow for redemptions/subscriptions in kind for the VA funds managed by them, unless they also had a separate Type 1 (VA dealing) licence.     Now, as long as firms notify the SFC (and HKMA where applicable), custody VAs with authorised providers like SFC-licensed platforms or banks, and adhere to stringent AML protocols, they can facilitate these transactions seamlessly – which significantly expands on the investor and fund raising universe for these VA funds.  This also paves the way for more tokenized real-world assets (RWAs) and hybrid funds, allowing investors to subscribe with Bitcoin or Ether directly, which not only streamlines operations for market makers but also attracts global institutional flows seeking exposure without fiat conversion friction.

Finally, exemptions for institutional and qualified corporate PI from net worth and risk disclosure requirements streamline operations for high-net-worth entities, reducing friction in VA dealings and encouraging participation from global funds and family offices.

These changes are a welcome, but balanced “loosening” of the VA regulatory regime for Hong Kong.  They should increase market liquidity, product diversity, and encourage institutional flows. Hong Kong continues to maintain a strong focus on investor protection and regulatory transparency alongside the facilitation of market development, positioning the city as a competitive and well-regulated hub for VA activities.

 
¹  Licensing or registration conditions and terms and conditions for licensed corporations or registered institutions providing virtual asset dealing services and virtual asset advisory services (“Appendix 6 T&C”).

²  “Staking activities” include any activities carried out by licensed corporations or registered institutions on behalf of its clients which involve the process of committing or locking client virtual assets to participate in a blockchain protocol’s validation process based on a proof-of-stake consensus mechanism, with returns generated and distributed for that participation.

³  Operational rules and procedures for responding to any events negatively impacting “staked” client VA.

⁴  An acknowledgement executed by the client confirming that the client understands the risks involved in using such services.

⁵ Such as the Authorised Service Providers and 3rd party validators.

⁶ Including the types and nature of additional risks that the “staked” client VA may be subject to (for example, slashing risk, lock up risk due to delayed unstaking processes, blockchain protocol staking related technical error / bug risk, hacking risk and inactivity risk relating to the validators, and the legal uncertainty relating to staking which may affect the nature and enforceability of a client’s interest in client VA which have been staked.

⁷ Types of returns offered, sources of returns, method of calculation of the returns, return limitations, timing relating to the returns.

⁸ For example, including those as agreed between itself and the Authorised Service Provider.

⁹ Such as compensation arrangements (if any) for slashing incidents.

¹⁰ Such information should include without limitation termination decisions, options available (for example, unstaking) and material changes in circumstances arising during the termination process.

¹¹ See the SFC’s Circular on staking services provided by virtual asset trading platforms dated 7 April 2025.

¹² See the SFC’s Circular on SFC-authorised funds with exposure to virtual assets revised on 7 April 2025.

¹³ See the HKMA’s Circular on Provision of Staking Services for Virtual Assets from Custodial dated 7 April 2025.

¹⁴ Except for VA portfolio managers and VA discretionary account managers which have the RA9 Terms and conditions (see paragraph 23 of the Joint circular on intermediaries’ virtual asset-related activities issued on 22 December 2023) (the “Joint Circular”) imposed on their licences or registrations.

¹⁵ Applicable requirements under Chapter 12 of the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers).