Eugene Cheung, Chief Commercial Officer of OSL Group, wrote about Hong Kong SFC's latest movements regarding digital assets and the future direction of the industry.
Recent regulatory moves from Hong Kong’s Securities and Futures Commission (SFC) have drawn significant attention to the digital asset sector, capturing the focus of both the Web3 and traditional finance worlds. First, the SFC issued its "Supplemental joint circular on intermediaries’ virtual asset-related activities" on September 30. This guidance clarified that all market participants must operate through SFC-licensed intermediaries when engaging in certain virtual asset activities. On October 17, Dr Erip Yip, the SFC's Executive Director of Intermediaries, delivered a keynote speech in a seminar organised by the Association of Fund Administrators of Hong Kong and the Greater Bay Area, signaling support for fostering a digital asset fund ecosystem that is competitive, secure, and—above all—compliant and protective of investors.
These actions chart a course for Hong Kong’s digital asset industry: establishing rules while encouraging innovation, directly echoing the market’s most pressing question: How do we build an ecosystem where institutional investors can participate with confidence? The answer is to build a robust innovation engine set firmly within a clear compliance framework.
A Clear Licensing Path: Market Volatility Underscores Compliance
Institutional capital considers regulatory compliance a prerequisite for entry. The September 30 joint circular, building on the existing framework, clarified the requirements for compliant pathways for specific activities like digital asset OTC trading and staking. This move provides a clear compliance path for business activities that previously operated in a regulatory grey area, bringing them within a transparent, supervised, and licensed regime.
The value of this framework was highlighted by subsequent events. On October 11, as global crypto markets experienced another bout of severe volatility, investor asset safety and counterparty risk became paramount concerns. This is precisely what regulation aims to address.
The SFC's clarity also raises the bar for service providers. For instance, OSL Group's institutional-grade one-stop trading and asset management service, is designed to help institutions access the market securely and efficiently while meeting regulatory requirements. This platform also demonstrated robust performance during recent market turbulence. It is these SFC requirements for dealing with licensed intermediaries that provide clear guidance and security assurances that risk-conscious financial institutions need to participate in the digital asset market.
Supporting Compliant Innovation: Exploring Paths for Asset Tokenization
While clarifying existing rules, Hong Kong is also providing space for development in innovative fields, including the tokenization of Real-World Assets (RWA). The signals from the SFC’s October seminar are closely aligned with its previously announced "ASPIRe" strategic priorities, which emphasize building partnerships with the industry through communication. This reflects the regulator's open approach to guiding compliant innovation.
RWA is widely regarded as one of the important bridges connecting digital assets with the real economy. Within this field, fund tokenization has emerged as one of the first application areas to demonstrate viability, owing to its high degree of standardization and clear use cases. The SFC's stance not only provides valuable policy guidance for practitioners but also underscores Hong Kong's support for compliant innovation. As one of the earliest participants involved in Hong Kong’s regulated digital asset ecosystem, OSL and other licensed institutions are actively leveraging their accumulated experience in compliant operations and technological security to provide professional solutions for RWA, working to assist relevant projects in areas such as asset valuation, technical implementation, and custody services to help them launch robustly within the compliance framework.
From Ideas to Practice: The Industry's Need for In-Depth Dialogue
The SFC's path of steadily advancing regulatory awareness while simultaneously exploring innovation has effectively outlined the future landscape for Hong Kong's digital asset market: compliance will become the cornerstone of all activities, while compliant innovations, like tokenization, are one of the most promising growth engines.
However, regulatory clarity is only the first step. For market participants, the real challenge lies in how to build mutual trust with regulators and, while adhering to the regulatory framework, translate promising business potential into actual commercial growth. In a dynamic market, institutions need to build clear compliance strategies and direction. This is also one of the core issues the industry urgently needs to discuss.
The Finternet 2025 Asia Digital Finance Summit, supported by OSL Group, will provide a forum for this discussion on November 4. Top global industry leaders and policy experts will be brought together to navigate the key challenges facing the digital asset industry's development. The goal is to explore viable solutions and propel the industry from conceptualization to market practice.
Future success will belong to those participants who can both deeply understand compliance requirements and boldly embrace technological innovation. Achieving this goal will require collaboration across the entire ecosystem to discover new growth opportunities within regulatory certainty, forging a viable path forward for the future of digital finance in Hong Kong and around the world.
About OSL Group
OSL Group (HKEX: 863.HK) is a leading global financial infrastructure platform bridging traditional finance and the digital asset economy through blockchain technology. The Group is dedicated to providing efficient, seamless, and regulatory-compliant financial services to individuals and businesses worldwide.
OSL delivers a comprehensive suite of regulated services through its licensed platforms, including 24/7 OTC brokerage with deep liquidity fiat gateways and competitive pricing; omnibus brokerage solutions enabling traditional financial institutions to integrate digital assets; SOC 2 Type 2-certified custody with up to US$1 billion insurance protection; and compliant retail trading channels; wealth management solutions, including scheduled launches on tokenised treasuries and RWAs; and in preparation for cross-border payment infrastructure via OSL Pay.
"Open, Secure, Licensed" are the principles OSL lives by. OSL is expanding its compliant infrastructure across Japan, Australia, and Europe, potentially Southeast Asia, powering the next generation of global financial infrastructure.
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