The Hong Kong Securities and Futures Commission (SFC) has opened pilot programs for virtual asset margin financing and perpetual contracts, limited to professional investors, to enhance liquidity and risk management.
On February 11, the SFC announced new guidelines permitting licensed brokers providing virtual asset trading services to expand their scope to include “virtual asset margin financing,” allowing the use of virtual assets as collateral. At the same time, a “high-level framework” was established to enable licensed virtual asset trading platforms to offer perpetual contracts to professional investors.
Opening virtual asset margin financing to boost market participation
The SFC stated that these measures are part of the latest developments under the “ASPIRe Roadmap” to diversify digital asset products and services. In the future, licensed virtual asset brokers can provide virtual asset financing services to securities margin clients, provided they have sufficient collateral and robust investor protection mechanisms.
SFC Chief Executive Officer Julia Leung earlier mentioned that, considering the high volatility of virtual assets, the SFC has adopted a cautious initial approach. Initially, only Bitcoin and Ethereum, the largest and most liquid assets, will be accepted as collateral.
The SFC hopes that this initiative will encourage margin clients with solid credit and collateral to participate more actively in virtual asset trading, thereby increasing liquidity in the Hong Kong market within a risk-controlled framework.
Perpetual contracts included in regulations, limited to professional investors
More notably, the SFC has for the first time established a “high-level framework” for licensed virtual asset trading platforms to develop leveraged products restricted to professional investors, including the highly watched “perpetual contracts.”
Perpetual contracts are derivative products without an expiration date, maintaining a link to spot prices through a funding rate mechanism, and are among the most traded tools in global cryptocurrency markets. Hong Kong has historically taken a cautious stance toward these products, but now, within the scope of professional investors, the market is gradually opening up. This indicates that regulators are beginning to align with international market practices under manageable risk conditions.
The SFC emphasized that the framework will focus on three core principles: highly transparent product design, clear and comprehensive information disclosure, and robust operational monitoring.
The SFC stated that opening perpetual contract products aims to assist investors in implementing risk management strategies and to improve liquidity in the spot markets of related assets.
Subsidiaries may act as market makers, introducing new liquidity sources
To further invigorate the virtual asset trading ecosystem, the SFC also permits subsidiaries of licensed virtual asset trading platforms to act as market makers, provided strict conflict-of-interest prevention measures are in place.
This arrangement means platforms can, through compliant frameworks, introduce additional liquidity channels, helping to narrow bid-ask spreads and deepen market depth.
Dr. Yip Chi-hang, Executive Director of the SFC’s Intermediaries Division, stated that following the ASPIRe Roadmap’s phased development approach is crucial for the scalable growth of Hong Kong’s digital asset market.
He emphasized that these targeted measures are designed not only to enhance market liquidity but also to demonstrate the SFC’s firm commitment to developing Hong Kong’s digital asset market in a sustainable and collaborative manner.
The SFC indicated that it will continue to monitor the implementation of these measures and maintain close communication with industry stakeholders to ensure these efforts foster a safe and competitive market environment in Hong Kong.
- This article is reprinted with permission from BlockTempo.
- Original title: “Hong Kong SFC Eases Virtual Asset Regulations: Opens Margin Financing and Perpetual Contracts”
- Original author: Block Sister MEL
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