Source: Hong Kong Securities and Futures Commission (SFC)

Note: In a thematic keynote speech delivered at the Hong Kong Web3 Carnival 2026 held on the morning of April 26, Ye Chi-hang, Executive Director of the Intermediaries Division of the Hong Kong SFC, revealed that an announcement would be made this afternoon regarding allowing the first-ever tokenized asset trading framework worldwide. This would not be limited to tokenized money market funds, but would also include all authorized assets. As expected, on the afternoon of April 26, the SFC website released this new regulatory framework. It allows tokenized SFC-authorized investment products to be bought and sold in the secondary market. The following is the SFC regulatory document:

I. New regulatory framework Permitting recognized tokenized investment products to be traded in the secondary market

The Hong Kong Securities and Futures Commission (SFC) today announced a new regulatory framework to facilitate, on a trial basis in Hong Kong, the trading in the secondary market of tokenized SFC-recognized investment products (tokenized products). This is intended to foster long-term development of digital asset trading activities in Hong Kong and support the continued flourishing of the ecosystem.

In the circular issued by the SFC (see below), new guidance is set out. The primary purpose is to facilitate secondary market trading of SFC-recognized open-ended funds on SFC-licensed virtual asset trading platforms, thereby further expanding the regulated trading services available to retail investors. However, the SFC will also consider, on a case-by-case basis, arrangements allowing over-the-counter secondary market trading.

Since the SFC first set out the regulatory framework relating to tokenization at the end of 2023, product issuers in Hong Kong have been actively implementing the tokenization of their products and seizing the relevant market opportunities (Note 1). As of March 2026, 13 tokenized products have been offered to the Hong Kong public. The total value of assets under management of the tokenized share classes has increased by approximately sevenfold over the past year to about HKD 10.7 billion.

In view of this, enabling around-the-clock secondary market trading is timely. It can further promote the integration of tokenized products with the Web3 ecosystem by potentially using 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 trades outside the normal trading hours of the relevant portfolio securities), the new measures are drawn by reference to existing practices applicable to exchange-traded funds and SFC-licensed virtual asset trading platforms. These measures cover fair pricing, orderly trading, liquidity provision, and disclosure.

Ms. Jing Wei-yu (Carrie Lam), Chief Executive Officer of the SFC, said: “In the process of building a digital asset ecosystem in Hong Kong, the new regulatory framework marks another important milestone. This comprehensive and all-round ecosystem will be both innovative and scalable, and will provide robust investor protection. The new initiative allows traditional securities products, after being tokenized, to be traded at night and on weekends, and promotes around-the-clock liquidity through the use of regulated stablecoins and tokenized deposits—thereby meeting investors’ 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 will consider, in due course, expanding the product scope.

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

Remarks:

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

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

II. Circular on Secondary Market Trading of Recognized Tokenized Investment Products

1. The Securities and Futures Commission (SFC) will, in accordance with the various requirements set out in this circular, consider permitting tokenized SFC-recognized investment products (tokenized products) to be traded by the Hong Kong public in the secondary market.

2. This circular should be read together with (i) “Circular on Recognized Tokenized SFC-Approved Investment Products” (English only) and (ii) “Circular on Activities of Intermediaries Engaged in Tokenized Securities Activities” (collectively referred to as the two tokenization circulars). The terms used in this circular have the same meanings as those defined in the above circulars.

   A. Background

3. In recent years, with support from the Government, relevant local authorities and the industry, Hong Kong has become a hub for financial innovation, covering various frontier developments such as tokenization. Among them, since the publication of the two tokenization circulars in November 2023, the development of tokenized products has been particularly encouraging.

4. To promote the next stage of development and enhance market scalability, the SFC will allow tokenized products to be traded in the secondary market to increase their tradability, and further integrate them into Hong Kong’s Web3.0 ecosystem. For this purpose, the experience of the exchange-traded fund (ETF) market and operators of SFC-licensed virtual asset trading platforms in Hong Kong over the past few years provides practical reference value and a solid foundation for achieving the aforementioned objectives.

5. Drawing on these experiences, the SFC has formulated the relevant requirements set out in this circular for the secondary market trading of tokenized products. These include the operation of trading channels, fair pricing, liquidity provision, disclosure, client onboarding, and notification. These requirements aim to support fair and orderly secondary market trading of tokenized products.

6. The requirements are mainly designed to facilitate secondary market trading of SFC-recognized open-ended funds on platforms. We will consider, where appropriate, including by way of amendments, accepting other types of products.

   B. Requirements for Secondary Market Trading of Tokenized Products

7. Product providers should ensure that the relevant products comply with the applicable requirements and rules in the relevant rules and regulations, as well as the product codes (including product provider eligibility, product structure, investment and operational requirements, disclosure, and continuing compliance responsibilities).

   Trading Channels

8. Retail investors may trade tokenized products in the secondary market via the platform provided by SFC-licensed virtual asset trading platforms (i.e., trades automatically matched on-screen).

9. Trading of tokenized products on a platform should follow the existing trading operations, rules, and risk monitoring measures applicable to the trading of virtual assets on that platform, in accordance with the “Guidelines for Virtual Asset Trading Platform Operators” (the “VASP Guidelines”).

10. For trading of tokenized products on a platform, the SFC-licensed virtual asset trading platform should execute trades for a client only when the client has sufficient funds or product holdings with equivalent tradability in the account of the platform operator to complete the transaction.

11. Before launch of the trading arrangements, product providers should cooperate with the relevant SFC-licensed virtual asset trading platform as needed to test the trading arrangements for their tokenized products on the platform (including operational processes, risk monitoring, and system readiness), and ensure that the arrangements are satisfactory.

    Fair Pricing

12. The SFC-licensed virtual asset trading platform should implement effective risk management and supervisory control measures to ensure fair pricing for the trading of tokenized products on the platform. Such measures should include:

    a) if the proposed transaction price will deviate materially from the relevant real-time or near real-time indicative net asset value per unit of the product (the deviation threshold will be reasonably determined taking into account the characteristics of the relevant product), the platform should issue a warning to investors (Price Deviation Alert)2;

    b) explain to investors their option to subscribe or redeem based on net asset value (i.e., subscription or redemption in the primary market rather than trading in the secondary market), and the related impacts3; and

    c) implement the system monitoring measures, pre-trade automated trading controls and periodic post-trade surveillance set out in paragraph 11.13 of the VASP Guidelines, as well as other monitoring measures reasonably designed for the following purposes: preventing excessive price fluctuations (e.g., setting trading price range limits and cooling-off periods based on the last traded price determined with reference to the relevant product), preventing market manipulation, and identifying any suspicious market manipulation and misconduct.

13. Similarly, when facilitating its clients’ trading of tokenized products on an SFC-licensed virtual asset trading platform (via connecting brokers)4, an SFC-licensed corporation or registered institution should ensure that its trading interface displays a price deviation warning to investors, and informs investors of the option in paragraph 12(b) to subscribe or redeem via the primary market.

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

    Liquidity Provision

15. Product providers should:

    a) make their best efforts to establish arrangements to ensure that each tokenized product has at least one market maker (Note: a term used in Hong Kong markets, meaning a market maker/liquidity provider), and that before terminating its market making services, each market maker will provide at least three months’ prior notice;

    b) closely monitor the secondary market trading activities and liquidity of its tokenized products, maintain close communication with the market maker it has appointed, develop appropriate contingency plans5, and take necessary remedial actions in the best interests of investors;

    c) appoint distributors for its tokenized products, and such distributors should be SFC-licensed corporations or registered institutions and should be able to handle subscription and redemption requests from third-party investors, except for certain very limited circumstances6; and

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

16. An SFC-licensed virtual asset trading platform7 should:

    a) conduct due diligence and periodic monitoring of the performance of all market makers admitted to its platform by reference to the agreed terms; and reasonably satisfy itself that such market makers still have the required competence and adequate resources to properly perform their market maker functions;

    b) ensure that all market makers admitted to its platform continue to meet the established standards in respect of bid-ask spread, quote values, minimum quote maintenance duration and participation rate;

    c) when a market maker admitted to its platform fails to meet the relevant responsibilities, contact the relevant market maker for corrective action; and

    d) specify in its agreements with the market makers: (i) the eligibility criteria and responsibilities applicable to market makers for tokenized products; and (ii) the arrangements to be implemented when a market maker ceases to provide 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 (if applicable) other regulatory authorities.

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

    Disclosure

19. Sales documents for tokenized products offered for secondary market trading (including product summaries) should clearly set out:

    a) risks relating to secondary market trading of tokenized products, such as liquidity risk and price deviation risk (trading may be very thin, and the transaction price may have a significant premium/discount to the net asset value, particularly outside the normal operating hours of Hong Kong’s financial markets and during weekends), price fragmentation risk (including that different trading channels may have different transaction prices), and the risk of reliance on market makers;

    b) key information about the trading channels (e.g., operating procedures, settlement procedures, settlement times, pre-set funding requirements, differences between the secondary market and the primary market, and whether tokenized products can be traded across channels in an interoperable manner8), market maker arrangements (including any remuneration and/or incentives provided by product providers and/or SFC-licensed virtual asset trading platforms to market makers9), and indicative ranges of fees applicable to secondary market trading, together with a note directing investors to the relevant SFC-licensed virtual asset trading platform website so that they can understand the details of the secondary market trading arrangements (also see paragraph 20(a));

    c) circumstances under which secondary market trading of tokenized products may be suspended;

    d) the list of market makers for tokenized products (with a note directing investors to the website with the latest list), and any affiliated entities of the product provider acting as market makers, together with disclosure of relevant potential conflicts of interest.

20. The SFC-licensed virtual asset trading platform and connecting brokers should maintain or provide access to channels to the designated online interface(s) (e.g., a website or an application) in order to:

    a) disclose information about the secondary market trading arrangements for tokenized products, including trading channels, market maker arrangements (including any remuneration and/or incentives provided by product providers and/or SFC-licensed virtual asset trading platforms to market makers), market maker eligibility criteria, fee schedule, and indicative bid-ask spreads10;

    b) provide (i) real-time or near real-time indicative net asset value per unit11 (updated usually at least once every 15 seconds during trading hours); and (ii) the latest net asset value per unit12 for tokenized products, and state the data source and the update frequency; and

    c) highlight to customers who intend to participate in the secondary market trading of tokenized products the relevant risks, such as liquidity risk and price deviation risk (trading may be very thin, and the transaction price may have a significant premium/discount to the net asset value, particularly outside the normal operating hours of Hong Kong’s financial markets and during weekends), price fragmentation risk (including that different trading channels may have different transaction prices), and the risk of reliance on market makers. Before opening accounts for customers who intend to participate in secondary market trading of tokenized products, the SFC-licensed virtual asset trading platform and connecting brokers should obtain confirmation from the customers that they understand the above risks.

    Notification

21. Generally, product providers should notify the SFC in advance of any abnormal situations relating to the tokenized products that they manage, including but not limited to any matters that may adversely affect the operation, secondary market trading and liquidity of their tokenized products (including receiving a resignation notice from the last market maker).

22. If any of the following occurs, product providers should notify the SFC and investors as soon as practicable: (i) termination or suspension of trading of the tokenized products in the primary or secondary market; or (ii) termination, interruption or suspension of market maker activities. The product provider should include in such notice an assessment of the impact of the event on the tokenized products it manages, remedial actions, and appropriate contingency plans.

    C. Pre-consultation, Applications and Approval

    For Product Providers

23. For new investment products that are intended to have tokenization-related features (primary market trading and/or secondary market trading) and require recognition from the SFC, prior consultation with the SFC is required.

24. For existing SFC-recognized investment products that intend to introduce tokenization-related features (primary market trading and/or secondary market trading), prior consultation with the SFC and approval from the SFC are required.

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

26. For secondary market trading arrangements that have already been approved by the SFC previously (e.g., trading mechanisms, price deviation alerts, market maker arrangements, and new trading channels), product providers should consult the SFC in advance regarding any subsequent material proposed changes.

    For Intermediaries Engaged in Secondary Market Trading of Tokenized Products

27. Intermediaries (including SFC-licensed virtual asset trading platforms and intermediaries intending to carry out OTC secondary market trading of tokenized products) should notify their case officer of the SFC13 and discuss their proposals14 with the case officer before commencing secondary market trading business for the first time. If thereafter significant changes are made to the arrangements that have been communicated, such intermediaries should also notify the SFC case officer and, if applicable, the HKMA.

28. If you wish to seek clarification on any part of this circular, please contact us.

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

    1. Including tokenized share classes of SFC-recognized investment products.

    2. The SFC-licensed virtual asset trading platform should ensure that when the proposed transaction price deviates beyond the specified threshold from the indicative net asset value per unit, a price deviation warning is displayed on the investor’s trading interface.

    3. Such alerts should explain that such subscriptions and redemptions are subject to (if applicable): (i) normal primary market trading hours (e.g., only open Monday to Friday); (ii) the use of liquidity risk management tools; and (iii) the “unknown price” valuation mechanism, under which subscriptions and redemptions of fund units are executed at the next calculated net asset value, which may be higher or lower than the prevailing secondary market price.

    4. Connecting brokers refer to entities that transmit clients’ secondary market trading instructions to SFC-licensed virtual asset trading platforms. Connecting brokers should comply with paragraph 18 and Schedule 7 of the “Code of Conduct for Licensed Persons or Registered Persons” of the Securities and Futures Commission.

    5. For example, contingency plans should include: (i) whether to temporarily halt secondary market trading of tokenized products when primary market trading is suspended; and (ii) arrangements to ensure, when needed (especially under extreme market conditions), that backup market makers can be arranged and activated.

    6. Please refer to the cases set out in Question 1 of the “FAQs on Exchange-Traded Funds and Listed Funds” (English only).

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

    8. For the avoidance of 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 be intended to assist investors in assessing the liquidity and supply-demand conditions of tokenized products on SFC-licensed virtual asset trading platforms.

    10. In addition to the provisions set out in paragraph 20, the SFC-licensed virtual asset trading platform and connecting brokers should also comply with other existing disclosure requirements.

    11. Indicative net asset value refers to a real-time estimated net asset value per unit of the tokenized product, calculated during the trading hours of the tokenized product on the SFC-licensed virtual asset trading platform, and typically based on the most recently available market prices of the components in the product’s investment portfolio.

    12. Latest net asset value refers to the latest official net asset value per unit of the tokenized product, calculated at the valuation time of the most recent primary market trading day according to its constitutive documents.

    13. According to the “Circular on Activities of Intermediaries Engaged in Tokenized Securities Activities,” registered institutions should also notify the Hong Kong Monetary Authority (HKMA).

    14. Such notifications should be made as soon as practicable within a reasonable scope. For example, when product providers consult the SFC in advance under paragraphs 23 to 26, the relevant SFC-licensed virtual asset trading platform(s), SFC-licensed corporations, and registered institutions should also notify the SFC and, if applicable, the HKMA.