Hong Kong SFC Introduces Strict Crypto Custody Standards with Cold Wallet Rules

Generated by AI AgentCoin World
Friday, Aug 15, 2025 6:16 am ET2min read
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Aime RobotAime Summary

- Hong Kong’s SFC introduced strict crypto custody standards, banning smart contracts in cold wallets and mandating certified hardware modules, whitelisted addresses, and 24/7 security monitoring.

- The rules aim to prevent unauthorized access and cyberattacks, aligning with global best practices after $3B+ in global crypto security breaches, and establish air-gapped environments for private key storage.

- The ban contrasts with institutional practices using smart contracts for custody but reflects SFC’s focus on minimizing attack vectors, reinforcing Hong Kong’s fintech ambitions and market integrity.

- These measures support Hong Kong’s 2024 crypto expansion efforts, including ETFs and stablecoin regulations, while analysts highlight the need for compliance to address evolving digital asset risks and boost institutional trust.

Hong Kong’s Securities and Futures Commission (SFC) has issued immediate and comprehensive guidance on cryptocurrency custody standards, introducing stringent requirements for cold wallet implementations. The new measures prohibit the use of smart contracts in cold wallets, mandate the use of certified hardware security modules, and require whitelisted withdrawal addresses. A 24/7 security operations center is also a key requirement to monitor systems, networks, and infrastructure [1].

The SFC’s circular emphasizes the need for air-gapped environments where private keys are used, with strict physical access controls and offline key storage. These rules aim to minimize the risk of unauthorized access and cyberattacks, aligning with global best practices following high-profile security breaches that have resulted in over $3 billion in losses worldwide [2]. The regulator stated that these standards will become core expectations for virtual asset custodians, contributing to a consistent and secure industry framework [3].

One of the most notable restrictions is the outright ban on smart contracts in cold wallets, aimed at reducing online attack vectors. This move contrasts with common institutional practices, where custodians like BitGo and Safe leverage smart contracts for both hot and cold storage solutions. However, the SFC’s decision underscores its commitment to enhancing security by limiting potential points of failure in custody systems [4].

The new guidance aligns with Hong Kong’s broader strategy to position itself as a crypto and fintech hub in Asia. Earlier in 2024, the region launched spot

Bitcoin
and Ether ETFs and introduced the ASPIRe roadmap to expand access while strengthening safeguards. In August, the stablecoin regime was formalized with a public registry of licensed issuers, and additional virtual asset trading platform licenses were issued in late 2024 [5].

Analysts view the SFC’s actions as a pivotal step in building trust and encouraging institutional participation in Hong Kong’s digital asset market. The clarity provided by these rules allows market participants to operate with greater confidence, knowing that a robust legal and operational framework is in place [6]. While compliance may increase operational costs for exchanges, the regulatory push is considered necessary to address the evolving risks associated with digital assets and cyber threats [7].

The implementation of these standards is expected to shape how exchanges manage capital and develop custody strategies. With enhanced oversight and technological safeguards, the focus will shift toward compliance, transparency, and investor protection. The SFC’s approach not only reinforces Hong Kong’s fintech ambitions but also demonstrates a firm commitment to maintaining market integrity in the digital asset space [8].

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Sources:

[1] title1: Hong Kong SFC Tightens Custody Standards for Crypto ... (url: https://www.coindesk.com/policy/2025/08/15/hong-kong-regulator-tightens-custody-standards-for-licensed-crypto-exchanges)

[2] title2: Hong Kong SFC Tightens Crypto Custody Rules After ... (url: https://cryptonews.com/news/hong-kong-sfc-tightens-crypto-custody-rules-after-global-security-incidents/)

[3] title3: Hong Kong Securities Regulator Tightens Crypto Custody ... (url: https://www.blockhead.co/2025/08/15/hong-kong-securities-regulator-tightens-crypto-custody-standards/)

[4] title4: Hong Kong Securities and Futures Commission issued a ... (url: https://www.binance.com/square/post/28335630120386)

[5] title5: Tough New SFC Custody Rules Hit Hong Kong Crypto ... (url: https://blockonomi.com/tough-new-sfc-custody-rules-hit-hong-kong-crypto-exchanges/)

[6] title6: SFC Unveils Robust New Standards for Enhanced Security (url: https://www.bitget.com/news/detail/12560604913660)

[7] title7: Hong Kong SFC Issues Stricter Custody Standards for ... (url: https://www.cryptotimes.io/2025/08/15/hong-kong-sfc-issues-stricter-custody-standards-for-crypto-platforms/)

[8] title8: Hong Kong regulator tightens custody standards for crypto ... (url: https://www.coinlive.com/en/news-flash/871802)