In a strategic move to cement its role as a global Web3 leader, Hong Kong’s financial watchdog has rolled out fresh regulations for crypto staking, underscoring its commitment to a thriving digital asset ecosystem.
The Securities and Futures Commission (SFC) unveiled new regulatory guidance on April 7 aimed at overseeing cryptocurrency exchanges that offer crypto staking services, as well as investment funds with exposure to staked digital assets. The move comes as part of Hong Kong’s broader ambition to build a secure and sustainable Web3 infrastructure.
A Framework for Crypto Staking Services
According to the SFC’s latest circular, any digital asset platform intending to offer crypto staking must first secure formal approval from the regulator. These platforms must retain direct control over staked assets, ensuring custody isn’t outsourced to third parties. The rules demand full transparency, requiring exchanges to inform users of potential risks, applicable fees, lock-up durations, and the procedures for both staking and unstaking.
Providers must also keep the regulator in the loop by submitting reports detailing their staking activities-marking a significant push for accountability and investor protection.
Investment funds regulated by the SFC aren’t left out. Any fund investing more than 10% of its net assets in digital tokens-whether directly or via intermediaries-must follow strict parameters. They can only invest in assets that are publicly accessible in Hong Kong and listed on approved platforms. Notably, leveraged crypto investments are banned under these guidelines.
Funds can participate in staking, but only if it aligns with their declared investment goals. Major shifts in strategy or risk exposure triggered by staking activities may necessitate prior investor notices-or even shareholder consent.
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A Cautious but Committed Approach to Web3
Speaking at the Hong Kong Web3 Festival, SFC executive director Christina Choi emphasized that the city is in it for the long haul when it comes to Web3. She highlighted the sector’s ongoing evolution and noted that meaningful outcomes may take time-potentially with a few bumps along the way.
“We’re not chasing trends,” Choi said. “Instead, we’re strengthening the groundwork and building an environment where Web3 innovation can mature and scale responsibly.”
Choi’s comments come amid turbulent times for certain corners of the digital asset space. Notably, major crypto exchange Bybit recently announced the closure of its NFT marketplace, citing waning demand. Bybit’s exit mirrors a similar move by NFT platform X2Y2, which also shut down operations as the NFT market continues to shrink-daily trading volumes have dropped over 70% year-over-year.
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Why Web3 Firms Should Bet on Hong Kong
Despite the NFT market downturn, Hong Kong continues to make a strong case for itself as a digital finance capital. Ranked third globally in the Global Financial Centers Index, the city offers clarity in regulation, proximity to Asia’s booming markets, and an innovation-friendly environment for blockchain companies.
Choi concluded her speech by framing the moment as pivotal. “We’re standing at the intersection of traditional finance and the emerging digital economy,” she said. “We’ve already made the leap from zero to one. The next phase-scaling from one to 100-will be defined by how effectively we nurture this convergence.”
This message aligns with Hong Kong’s ongoing efforts under its ASPIRe initiative, a strategic roadmap comprising 12 projects across five focus areas. The plan is designed to future-proof the virtual asset sector by enhancing access, refining compliance frameworks, and improving blockchain infrastructure.
With regulation, innovation, and market readiness all in motion, Hong Kong is clearly staking its claim in the future of finance.
