Hong Kong SFC — Securities and Futures Commission

Overview

The Hong Kong Securities and Futures Commission (SFC) regulates Hong Kong’s securities and futures markets under the Securities and Futures Ordinance (SFO), operating under the ASPIRe framework (Access, Safeguards, Products, Infrastructure, Relationships). The SFC authorized Asia’s first tokenized fund products in October 2023 through its Circular on Tokenisation of SFC-authorised Investment Products. The framework enabled ChinaAMC’s HKD Digital Money Market Fund — launched February 28, 2025 as APAC’s first retail tokenized fund — to reach $546.1 million in AUM by March 2026. In November 2025, the SFC expanded products and services for licensed VATPs, enabling integration of order books with global affiliates. The Stablecoin Ordinance was enacted in August 2025, with first licences expected early 2026. Legislative proposals for virtual asset dealer and custodian licensing are targeted for 2026.

Tokenized Fund Authorization Framework

The SFC’s Circular on Tokenisation (November 2, 2023) established explicit authorization criteria for tokenized fund products. The detailed framework requires tokenized fund products to satisfy all existing authorization requirements plus additional tokenization-specific requirements covering:

Technology governance: Fund managers must establish comprehensive governance frameworks for DLT platforms, including smart contract audit requirements, technology risk assessments, business continuity plans, and cybersecurity measures for private key management. The SFC expects smart contract audits to be conducted by independent qualified firms and updated whenever contracts are modified.

Custody standards: Tokenized fund shares must be custodied by SFC-licensed or approved custodians demonstrating digital asset custody capabilities. Custodians must maintain segregated wallet architecture, multi-signature authorization, insurance coverage, and the ability to transfer tokens to alternative custodians in the event of business failure. The qualified custodian requirements analysis examines how the SFC’s standards compare across jurisdictions.

Enhanced disclosure: Fund offering documents must disclose the blockchain network used, smart contract addresses and audit reports, tokenization-specific risks, and the conversion process between tokenized and traditional share classes.

Investor eligibility: Initial authorization limited tokenized fund products to professional investors, with the SFC indicating willingness to extend to retail investors for lower-risk products (such as tokenized money market funds).

Virtual Asset Trading Platform Licensing

The SFC administers the licensing regime for virtual asset trading platforms (VATPs) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Licensed VATPs may provide trading services for tokenized securities, including tokenized fund shares, to professional and (with specific conditions) retail investors.

As of March 2026, the SFC has licensed multiple VATPs, including HashKey Exchange and OSL. These licensed platforms provide the trading infrastructure that supports secondary market liquidity for tokenized fund products — complementing the primary market creation and redemption mechanism managed by authorized participants.

The combination of tokenized fund authorization and VATP licensing creates an integrated regulatory environment where tokenized fund products can be issued, traded, and settled within Hong Kong’s regulated market infrastructure.

Cross-Border Distribution and Mutual Recognition

The SFC participates in several cross-border fund distribution arrangements relevant to tokenized fund products:

SFC-MAS Mutual Recognition: The SFC and Singapore MAS mutual recognition framework enables qualifying funds to be distributed in each other’s markets. This arrangement could potentially extend to tokenized fund products, creating an Asia-Pacific distribution corridor.

Wealth Management Connect: The Greater Bay Area Wealth Management Connect scheme links Hong Kong with mainland Chinese investors. The SFC and China Securities Regulatory Commission (CSRC) have discussed potential inclusion of tokenized fund products, which would give mainland investors access to SFC-authorized tokenized funds.

Stock Connect and ETF Connect: Hong Kong’s Stock Connect programs with Shanghai and Shenzhen exchanges include an ETF Connect component. If tokenized ETFs are listed on HKEX, they could potentially be distributed to mainland Chinese investors through ETF Connect.

Coordination with Peer Regulators

The SFC coordinates with international regulators through IOSCO (where the SFC holds Board membership), bilateral cooperation arrangements, and the Asia-Pacific Regional Committee. For tokenized fund regulation, the SFC has engaged with:

• ESMA on mutual recognition considerations for tokenized fund products and convergence of technology governance standards
• The SEC through bilateral cooperation on tokenized fund regulatory approaches
• The FCA through post-handover cooperation arrangements
• MAS through the mutual recognition framework and Project Guardian knowledge sharing

The SEC vs. ESMA comparison provides context for how the SFC’s approach relates to Western regulatory frameworks, while the Asia-Pacific regulatory comparison positions the SFC’s framework against regional approaches.

Comparison with European MiCA Framework

The SFC’s tokenized fund authorization framework and the EU’s MiCA regulation represent fundamentally different approaches to the same challenge. MiCA establishes a comprehensive EU-wide legislative framework covering all crypto-asset service providers, with full enforcement beginning July 2026. The SFC’s approach, by contrast, integrates tokenized fund authorization within its existing Securities and Futures Ordinance — adapting established fund regulation to accommodate tokenization rather than creating a standalone crypto regulatory regime.

This difference has practical implications for fund sponsors. A tokenized fund authorized by the SFC operates under Hong Kong’s established fund regulatory framework with tokenization-specific overlays. A tokenized fund operating in the EU must navigate MiCA CASP authorization (for service providers), the DLT Pilot Regime (if using DLT trading infrastructure), UCITS or AIFMD (for fund authorization), and MiFID II (for distribution) — multiple overlapping regulatory frameworks that create compliance complexity.

The SFC’s framework also differs in its approach to retail investor access. While the EU’s MiFID II suitability requirements and ESMA consumer protection mandates create extensive retail distribution requirements, the SFC has taken a phased approach — initially limiting tokenized products to professional investors, then gradually expanding retail access based on operational track record and product risk profile.

HKEX Digital Asset Infrastructure

The Hong Kong Exchanges and Clearing Limited (HKEX) operates the listing and trading venue for Hong Kong-listed ETFs and is developing digital asset infrastructure that could support tokenized ETF listing and settlement. HKEX’s initiatives include:

• Settlement infrastructure: HKEX’s Central Clearing and Settlement System (CCASS) processes settlement for listed securities. The SFC has indicated a preference for tokenized fund products that can interoperate with CCASS, ensuring compatibility with existing institutional settlement workflows.
• Digital bonds: HKEX has facilitated the listing of tokenized bonds, demonstrating the exchange’s capacity to accommodate DLT-based securities.
• NAV calculation: HKEX provides end-of-day NAV publication for listed ETFs. For tokenized ETFs using on-chain NAV calculation, HKEX’s systems must accommodate real-time or near-real-time NAV dissemination.

Authorized Tokenized Fund Products

As of March 2026, the SFC has authorized seven tokenized fund products, representing a range of asset classes and structures. These include tokenized money market funds (the highest-priority category due to their simple portfolio composition and daily liquidity), tokenized bond funds, and tokenized multi-asset funds. The authorized products use a variety of blockchain networks, including Ethereum and permissioned enterprise chains, reflecting the SFC’s technology-neutral stance.

The SFC requires each authorized tokenized fund to maintain a traditional (non-tokenized) share class alongside the tokenized class, ensuring that investors can convert between tokenized and traditional shares without friction. This dual-class structure provides a safety mechanism — if DLT infrastructure experiences operational issues, investors can redeem through the traditional channel. The authorized participant model for tokenized ETFs must accommodate both tokenized and traditional creation units, a requirement examined in the AP blockchain models analysis.

The SFC’s authorization data shows that authorized tokenized fund products have attracted approximately HKD 5 billion in combined assets, with institutional investors representing the majority of inflows. The pace of new authorizations has accelerated through 2025 and into 2026 as the SFC has gained supervisory comfort with tokenized fund operations.

Fund managers authorized by the SFC for tokenized products include major global asset managers with Hong Kong operations — demonstrating that the SFC’s authorization framework is attracting institutional-grade sponsors rather than only crypto-native firms. The SFC’s Type 9 (asset management) license requirement ensures that all tokenized fund managers meet the same competence, capital, and compliance standards as traditional fund managers. The fund manager blockchain platform evaluation guide examines how SFC-licensed fund managers assess DLT platforms for tokenized fund operations.

Technology Governance and Smart Contract Standards

The SFC’s technology governance requirements for tokenized fund products are among the most prescriptive in any jurisdiction. Fund managers must conduct comprehensive technology risk assessments covering the blockchain network’s consensus mechanism, transaction throughput capacity, network decentralization characteristics, and historical uptime performance. Smart contract audits must be performed by independent firms with demonstrated expertise in the relevant blockchain programming languages (Solidity for Ethereum-based products, Move for Aptos-based products), and audit reports must be submitted to the SFC as part of the authorization application.

The SFC also requires ongoing technology monitoring — including real-time surveillance of smart contract operations, automated alerting for abnormal transaction patterns, and periodic re-auditing when contracts are upgraded. These requirements align with the approach described in the smart contract audit guide and exceed the technology governance standards currently required by ESMA under the DLT Pilot Regime or by the SEC through its comment letter practice. The DeFi integration compliance analysis examines how the SFC’s technology governance standards affect funds incorporating decentralized protocol interactions.

Impact on Fund Sponsors

Fund sponsors targeting Hong Kong for tokenized fund products benefit from: the SFC’s explicit authorization framework (the most detailed in Asia-Pacific); HKEX as a listing venue with established ETF infrastructure; access to Greater China capital through Wealth Management Connect and ETF Connect; a sophisticated ecosystem of custodians, administrators, and service providers; and the SFC’s Innovation Hub for pre-application engagement.

The SFC publishes circulars, guidelines, and FAQ documents at sfc.hk. The regulatory filing guide covers SFC filing procedures for tokenized fund authorization. The institutional investor guide examines SFC compliance considerations for institutional allocators, and the CBDC vs. stablecoin comparison examines settlement asset options relevant to the Hong Kong market.

For inquiries regarding this analysis: info@etftokenisation.com