Hong Kong expands crypto rules to allow margin financing and perpetual contracts

Hong Kong's securities regulator announced major policy enhancements allowing brokers to offer crypto margin financing and licensed platforms to provide perpetual contracts for professional investors, as the region continues its drive to become a crypto hub.

In a statement released on Wednesday, the Securities and Futures Commission announced measures that include a high-level framework for offering crypto perpetual contracts.

Under the new framework, licensed virtual asset trading platforms will be permitted to offer perpetual contracts only to professional investors. They must also implement strict risk management measures, including leverage limits, margin requirements, liquidation mechanisms, and enhanced disclosures. 

The SFC said the products would be subject to ongoing supervision, with platforms required to demonstrate adequate internal controls.

Separately, the SFC issued supervisory guidance allowing licensed intermediaries to provide financing for crypto asset trading using a broader range of collateral. The circular explicitly references bitcoin and ether as virtual assets that may be accepted as collateral, subject to client suitability assessments and internal risk controls.

The regulator also clarified conditions under which affiliated entities may act as market makers on licensed crypto platforms, citing the need to improve liquidity while managing conflicts of interest through governance, disclosure, and surveillance requirements.

Tim Sun, senior researcher at HashKey Group, said the new initiatives mark the point at which Hong Kong's licensed exchanges have begun to "systematically address the long-standing issue" of liquidity fragmentation. "By accessing global market depth through compliant channels, the market can improve efficiency and price quality, laying the groundwork for the next phase of commercial development," Sun added.

Liquidity focus

In a Wednesday speech at Consensus Hong Kong, SFC Executive Director of Intermediaries Eric Yip said the regulator's priorities for the year center on market quality rather than rapid expansion. 

"[This] year's focus is on liquidity — cultivating market depth, strengthening price discovery, and building investor confidence through a strategic blend of expanded access and responsible product innovation," Yip said in a synopsis published by the SFC.

Market participants described the changes as an incremental expansion rather than a shift in regulatory posture. Sherry Zhu, global head of digital assets at Futu Group, said in a statement shared with The Block that the firm viewed the measures as supporting closer integration between traditional securities and crypto assets. 

"These initiatives, including cross-collateralization between virtual assets and traditional securities, the introduction of perpetual contracts for professional investors, and the permitting of affiliated market making, fully demonstrate Hong Kong's continuous innovation in the regulation of virtual assets," said Zhu.