Source: Hong Kong Securities and Futures Commission

Note: Ms. Ye Zhi Heng, Executive Director of the Intermediaries Division of the Hong Kong Securities and Futures Commission, revealed during the thematic speech at the 2026 Hong Kong Web3 Carnival on the morning of April 26 that an announcement would be made this afternoon regarding the approval of the world’s first tokenized asset trading framework, not limited to tokenized money market funds but including all authorized assets. The new regulatory framework was officially published on the SFC website on the afternoon of April 26 as scheduled, allowing tokenized investment products recognized by the SFC to be traded in the secondary market. Below are the regulatory documents from the SFC:

1. New Regulatory Framework Permitting the SFC to Recognize Tokenized Products for Secondary Market Trading

The Hong Kong Securities and Futures Commission (SFC) announced today a new regulatory framework to promote the trial of secondary market trading of SFC-recognized tokenized investment products (tokenized products) in Hong Kong, with the aim of fostering long-term development of digital asset trading activities in the region and supporting the further growth of the ecosystem.

The circular issued by the SFC (see below) contains new guidelines primarily aimed at facilitating the secondary market trading of SFC-licensed open-ended funds that are tokenized, on licensed virtual asset trading platforms, to expand the range of regulated trading services available to retail investors. However, the SFC will also consider, on a case-by-case basis, arrangements for over-the-counter secondary market trading.

Since the initial establishment of the tokenization-related regulatory framework at the end of 2023, local product issuers have actively pursued tokenization of their products and seized related market opportunities (Note 1). As of March 2026, 13 tokenized products have been offered to the Hong Kong public, with the total assets under management of tokenized shares increasing nearly sevenfold over the past year to approximately HKD 10.7 billion.

In view of this, enabling round-the-clock secondary market trading is timely, as it can further promote the integration of tokenized products with the Web3 ecosystem through the potential use of regulated stablecoins and tokenized deposits in relevant transactions (Note 2). To address liquidity and investor protection issues in secondary market trading of tokenized open-ended funds (especially outside normal trading hours of the relevant securities portfolios), the measures draw on existing practices applicable to exchange-traded funds (ETFs) and licensed virtual asset trading platforms operated by the SFC. These measures cover fair pricing, orderly trading, liquidity provision, and information disclosure.

Ms. Carrie Lam, CEO of the SFC, stated: “The new regulatory framework marks another important milestone in building a digital asset ecosystem in Hong Kong. This comprehensive ecosystem will be innovative and scalable, with robust investor protection. The new measures allow traditional securities products to be traded at night and on weekends after tokenization, and promote round-the-clock liquidity through the use of regulated stablecoins and tokenized deposits, responding to investor needs in an increasingly fast-changing and uncertain market environment.”

The first batch of products is expected to mainly be tokenized money market funds. The SFC will review the operation of these products and consider expanding the scope of products in due course.

The SFC encourages product issuers and intermediaries (including licensed virtual asset trading platforms) to consult or notify the SFC before commencing work related to this regulatory framework.

Remarks:

1. The SFC issued two circulars on November 2, 2023 (“Circular on Tokenized Investment Products Recognized by the SFC” (English only) and “Circular on Activities of Intermediaries Engaged in Tokenized Securities Activities”), establishing the regulatory framework for tokenized products and securities-related activities.

2. Regulated stablecoins refer to fiat-backed stablecoins issued under licenses granted under the Stablecoin Regulations.

2. Circular on Secondary Market Trading of Tokenized Investment Products Recognized by the SFC

1. The Securities and Futures Commission (SFC) will consider, based on the provisions listed in this circular, permitting secondary market trading of SFC-recognized tokenized investment products (tokenized products) for the Hong Kong public.

2. This circular should be read together with (i) the “Circular on Tokenized Investment Products Recognized by the SFC” (English only) and (ii) the “Circular on Activities of Intermediaries Engaged in Tokenized Securities Activities” (collectively, the two tokenization circulars). The terminology used in this circular has the same meaning as defined in those circulars.

   A. Background

3. In recent years, supported by the government, local authorities, and industry, Hong Kong has become a hub for financial innovation, including developments in tokenization and other cutting-edge areas. Since the issuance of the two tokenization circulars in November 2023, the development of tokenized products has been particularly encouraging.

4. To promote the next phase of development and enhance market scalability, the SFC will permit secondary market trading of tokenized products to improve their tradability and further integrate them into Hong Kong’s Web3 ecosystem. The experience of Hong Kong’s robust ETF market and licensed virtual asset trading platform operators over the past few years provides practical reference and a solid foundation for achieving these goals.

5. Drawing on these experiences, the SFC has formulated the regulations outlined in this circular concerning secondary market trading of tokenized products, including trading channels, fair pricing, liquidity provision, disclosure, client onboarding, and notification. These rules aim to support fair and orderly secondary market trading of tokenized products.

6. These regulations mainly facilitate the secondary market trading of SFC-recognized open-ended funds on platforms. The SFC will consider, where appropriate, including through amendments, the acceptance of other types of products.

   B. Regulations on Secondary Market Trading of Tokenized Products

7. Product providers should ensure that their products comply with applicable rules and regulations, including the product code of conduct (covering provider qualifications, product structure, investment and operational requirements, disclosure, and ongoing compliance).

   Trading Channels

8. Retail investors may trade tokenized products in the secondary market through platforms provided by licensed virtual asset trading platforms, i.e., automated trading on screens.

9. Trading of tokenized products on the platform should follow the “Guidelines for Virtual Asset Trading Platform Operators” (“VASP Guidelines”), applying existing trading operations, rules, and risk monitoring measures suitable for virtual asset trading on the platform.

10. For trading tokenized products on the platform, licensed virtual asset trading platforms should only execute trades when the client’s account holds sufficient funds or equivalent tradable holdings to complete the transaction.

11. Before launching trading arrangements, product providers should collaborate with relevant licensed virtual asset trading platforms to test the trading arrangements (including operational processes, risk monitoring, and system readiness) and ensure the arrangements are satisfactory.

    Fair Pricing

12. Licensed virtual asset trading platforms should implement effective risk management and supervisory controls to ensure fair pricing of tokenized products on the platform. These measures should include:

    a) If the proposed transaction price deviates significantly from the real-time or near-real-time indicative net asset value (NAV) per unit of the product (with the deviation threshold reasonably set considering the product’s characteristics), a price deviation warning should be issued to investors (Price Deviation Alert)2

    b) Inform investors that they may choose to subscribe or redeem at NAV (i.e., in the primary market), and explain the related implications3; and

    c) Implement system monitoring measures, pre-trade automated controls, periodic post-trade reviews, and other controls designed to prevent excessive price fluctuations (e.g., setting trading bands based on the last traded price and establishing cooling-off periods), market manipulation, and to detect suspicious activities.

13. Similarly, licensed entities (corporations or registered institutions) facilitating their clients’ trading of tokenized products on licensed virtual asset trading platforms should ensure that price deviation warnings are displayed on their trading interfaces and that clients are informed of the option to subscribe or redeem in the primary market as described in paragraph 12(b).

14. The SFC may require demonstration of trading interfaces, price deviation warnings, and/or other relevant interfaces.

    Liquidity Provision

15. Product providers should:

    a) Make best efforts to establish arrangements ensuring at least one market maker (Note: Hong Kong market term, meaning a liquidity provider) for each tokenized product, and that the market maker provides at least three months’ prior notice before terminating its services;

    b) Closely monitor secondary market trading activity and liquidity of their tokenized products, maintain close communication with appointed market makers, develop appropriate contingency plans5, and take remedial actions in the best interests of investors;

    c) Appoint distributors for their tokenized products, who should be licensed or registered entities capable of handling subscription and redemption requests from third-party investors, with few exceptions6; and

    d) Establish arrangements with licensed virtual asset trading platforms to facilitate transfers between primary and secondary markets (e.g., tokens subscribed in the primary market can be traded conveniently in the secondary market, and tokens purchased in the secondary market can be redeemed via the primary market).

16. Licensed virtual asset trading platforms7 should:

    a) Conduct due diligence and periodic supervision of all market makers approved on their platform, ensuring they remain competent and have adequate resources to perform their market-making functions;

    b) Ensure all approved market makers continuously comply with standards regarding bid-ask spreads, quote values, minimum quote duration, and participation rates;

    c) Address any non-compliance by market makers through contact and corrective measures; and

    d) Include in their agreements with market makers: (i) eligibility criteria and responsibilities for market makers of tokenized products; and (ii) arrangements for when market makers cease providing services for a particular tokenized product.

17. Distributors and market makers should ensure compliance with applicable laws, rules, regulations, and codes of conduct issued or enforced by the SFC and/or other relevant regulators.

18. If product providers and/or licensed virtual asset trading platforms offer remuneration and/or incentives to support market maker activities, they must comply with all applicable laws and regulations, including the “Code of Conduct for Licensed Persons and Registered Institutions” issued by the SFC and relevant provisions of the Securities and Futures Ordinance, to maintain market integrity and prevent misconduct.

    Disclosure

19. Sales documents (including product summaries) for tokenized products traded in the secondary market should clearly state:

    a) Risks related to secondary market trading of tokenized products, such as liquidity risk and price deviation risk (trading may be very thin, and transaction prices may significantly deviate from NAV, especially outside normal Hong Kong market hours and on weekends), fragmentation risk (different trading channels may have different transaction prices), and reliance on market makers;

    b) Main information about trading channels (e.g., operational processes, settlement procedures, settlement times, pre-settlement fund requirements, differences between primary and secondary markets, and whether tokenized products can be traded across channels in an interoperable manner8), market maker arrangements (including any remuneration and incentives provided by product providers and/or licensed virtual asset trading platforms), and indicative ranges of fees applicable to secondary market trading, with a note directing investors to the relevant licensed virtual asset trading platform’s website for detailed trading arrangements (see also paragraph 20(a));

    c) Situations where secondary market trading of tokenized products may be suspended;

    d) List of market makers for tokenized products (with a link to the latest list on the website), and disclosures of any affiliates of the product providers acting as market makers, along with potential conflicts of interest.

20. Licensed virtual asset trading platforms and connecting brokers should maintain or provide access to designated online interfaces (e.g., websites or apps) to:

    a) Disclose details of secondary market trading arrangements for tokenized products, including trading channels, market maker arrangements (including remuneration and incentives), market maker qualifications, fee schedules, and bid-ask spreads10;

    b) Disclose real-time or near-real-time indicative NAV11 per unit, updated at least every 15 seconds during trading hours; and the latest official NAV12, with data sources and update frequency explained; and

    c( Highlight relevant risks to clients intending to participate in secondary market trading of tokenized products, such as liquidity risk, price deviation risk (trading may be very thin, and transaction prices may significantly deviate from NAV, especially outside normal Hong Kong market hours and on weekends), fragmentation risk, and reliance on market makers. Before opening accounts for clients interested in trading tokenized products, licensed virtual asset trading platforms and connecting brokers should confirm that clients understand these risks.

    Notification

21. Generally, product providers should notify the SFC promptly of any abnormal situations related to the tokenized products they manage, including but not limited to any issues that could adversely affect their operation, secondary market trading, or liquidity (including notices of resignation from the last market maker).

22. In cases such as the termination or suspension of trading of tokenized products in the primary or secondary markets, or the termination, interruption, or suspension of market maker activities, product providers should notify the SFC and investors as soon as practicable. The notification should include an assessment of the impact of the event on the tokenized products under management, remedial actions, and appropriate contingency plans.

    ) C. Pre-Consultation, Application, and Approval

    For Product Providers

23. New investment products with tokenization features (primary and/or secondary market trading) requiring SFC approval must be pre-consulted with the SFC.

24. Existing SFC-recognized investment products intending to introduce tokenization features (primary and/or secondary market trading) must also be pre-consulted with and approved by the SFC.

25. The SFC will evaluate each application on a case-by-case basis. Given the evolving environment of the tokenization market, the SFC may provide further guidance or impose additional requirements as appropriate.

26. For secondary market trading arrangements previously approved by the SFC (e.g., trading mechanisms, price deviation alerts, market maker arrangements, and new trading channels), product providers should consult the SFC in advance of any significant subsequent modifications.

    For Intermediaries Engaged in Secondary Market Trading of Tokenized Products

27. Intermediaries (including licensed virtual asset trading platforms and intermediaries intending to engage in OTC secondary market trading of tokenized products) should notify their case officer13 before engaging in secondary market activities for the first time, and discuss their plans14. If there are significant changes to the arrangements after initial communication, the intermediaries should also notify their case officer and, if applicable, the HKMA.

28. To request clarification of any part of this circular, please contact us.

    Securities and Futures Commission                                      Securities and Futures Commission                                         Securities and Futures Commission
    Investment Products Department                                                                         Intermediaries Division                                                                              Market Supervision Department

    1. Including the tokenized share class of SFC-recognized investment products.

    2. Licensed virtual asset trading platforms should ensure that when the proposed transaction price deviates beyond the specified threshold from the indicative NAV per unit, a price deviation warning is displayed on the investor’s trading interface.

    3. The relevant notices should specify that such subscriptions and redemptions are subject to (if applicable): )i( normal primary market trading hours (e.g., only Monday to Friday); )ii( use of liquidity risk management tools; and )iii### “unknown price” valuation mechanism, whereby subscriptions and redemptions are executed at a calculated NAV that may be higher or lower than the prevailing secondary market price.

    4. Connecting brokers refer to entities transmitting clients’ secondary market trading instructions to licensed virtual asset trading platforms. Connecting brokers should comply with the “Code of Conduct for Licensed Persons and Registered Institutions” paragraph 18 and Schedule 7.

    5. Contingency plans may include: (i) whether to temporarily halt secondary market trading of tokenized products during primary market trading suspensions; and (ii) arrangements to ensure the appointment and activation of backup market makers when needed, especially under extreme market conditions.

    6. Refer to the FAQ on “Exchange-Traded Funds and Listed Funds” (English only), Question 1.

    7. The market maker mechanism (including market maker admission) is generally managed by the platform operator. Since some market makers may directly contact the platform operator without engaging with the product provider, the primary responsibility for admitting and monitoring market makers lies with the platform operator.

    8. To avoid doubt, units of tokenized products can be transferred, for example, to support cross-channel trading of tokenized products in an interoperable manner.

    9. Disclosures should aim to assist investors in assessing the liquidity and supply-demand conditions of tokenized products on licensed virtual asset trading platforms.

    10. Besides the provisions in paragraph 20, licensed virtual asset trading platforms and connecting brokers should also comply with other existing disclosure requirements.

    11. Indicative NAV refers to a real-time estimate of the NAV per unit of the tokenized product, calculated during trading hours on licensed virtual asset trading platforms, usually based on the most recent market prices of the product’s components.

    12. The latest NAV refers to the official NAV per unit of the tokenized product, calculated at the most recent valuation time point on the latest trading day in the primary market, as per its constituent documents.

    13. According to the “Circular on Activities of Intermediaries Engaged in Tokenized Securities Activities,” registered institutions should also notify the HKMA.

    14. Such notifications should be made as soon as practicable within reasonable scope. For example, when product providers consult the SFC in advance under paragraphs 23 to 26, the relevant licensed virtual asset trading platforms, licensed corporations, and registered institutions should simultaneously notify the SFC and, where applicable, the HKMA.