Source: Hong Kong Securities and Futures Commission (SFC)

Note: The Executive Director of the Intermediaries Division of the Hong Kong Securities and Futures Commission, Ye Chi-hang, revealed during a thematic speech at the 2026 Hong Kong Web3 Carnival held on the morning of April 26 that an announcement would be made this afternoon regarding allowing, for the first time in the world, a tokenized assets trading framework—covering not only tokenized money market funds, but also all authorized assets. As scheduled, on the afternoon of April 26, the SFC’s website published this new regulatory framework, which allows tokenized SFC-recognized investment products to be traded in the secondary market. Below is the SFC regulatory document:

I. New Regulatory Framework Permitting Secondary Market Trading of Tokenized SFC-Recognized Products

The Securities and Futures Commission (SFC) today announced a new regulatory framework to facilitate, on a trial basis in Hong Kong, secondary market trading of tokenized SFC-recognized investment products (“tokenized products”), thereby promoting long-term digital asset trading activities in Hong Kong and supporting further flourishing of the ecosystem.

The circular issued by the SFC in this regard (see below) sets out new guidance. Its main purpose is to facilitate secondary market trading of tokenized open-ended funds recognized by the SFC 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 to permit over-the-counter (OTC) secondary market trading.

Since the SFC first set out a tokenization-related regulatory framework at the end of 2023, product issuers in Hong Kong have continued to actively implement tokenization of their products and seize related market opportunities (Note 1). As of March 2026, 13 tokenized products have been offered to the Hong Kong public, and the total assets under management of the tokenized share classes have increased to approximately seven times over the past year, to HKD 10.7 billion.

In light of this, enabling round-the-clock secondary market trading is timely. It can further promote the integration of tokenized products with the Web3 ecosystem through the potential use of regulated stablecoins and tokenized deposits in the relevant transactions (Note 2). To address liquidity and investor protection issues in the secondary market trading of tokenized open-ended funds—particularly trading outside the normal trading hours of the relevant investment portfolio securities—the new measures draw on existing operational practices applicable to exchange-traded funds and SFC-licensed virtual asset trading platforms. The measures cover fair pricing, orderly trading, liquidity provision, and disclosure.

SFC Chief Executive Ms. Julia Leung said: “In the process of building a digital asset ecosystem in Hong Kong, the new regulatory framework marks another important milestone. This comprehensive, end-to-end ecosystem will be both innovative and scalable, and will provide robust investor protection. The new measures enable traditional securities products to be traded at night and on weekends after tokenization, and, by using regulated stablecoins and tokenized deposits, promote round-the-clock liquidity—thereby meeting investors’ needs in an increasingly fast-changing and uncertain market environment.”

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

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 Tokenized SFC-Recognized Investment Products” (English only) and “Circular on Activities of Intermediaries Engaged in Tokenized Securities”). These were used to establish 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 Tokenized SFC-Recognized Investment Products

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

2. This circular should be read together with (i) “Circular on Tokenized SFC-Recognized Investment Products” (English only) and (ii) “Circular on Activities of Intermediaries Engaged in Tokenized Securities” (together 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 multiple cutting-edge developments such as tokenization. Among them, since the two tokenization circulars were issued 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 allow tokenized products to be traded in the secondary market to enhance their tradability and further integrate them into Hong Kong’s Web3.0 ecosystem. To this end, the experience of Hong Kong’s robust exchange-traded fund (ETF) market and the operators of SFC-licensed virtual asset trading platforms in recent years provides practical reference value and lays a solid foundation for achieving the above objectives.

5. Drawing on these experiences, the SFC has developed the relevant regulations set out in this circular regarding secondary market trading of tokenized products. These include matters covering the operation of trading channels, fair pricing, liquidity provision, disclosure, client onboarding, and notification. These regulations are intended to support fair and orderly secondary market trading of tokenized products.

6. The relevant regulations are mainly designed to facilitate secondary market trading of SFC-recognized open-ended funds on platforms. We will consider accepting other types of products in appropriate circumstances, including through amendments to the regulations.

   B. Regulations on Secondary Market Trading of Tokenized Products

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

   Trading Channels

8. Retail investors may trade tokenized products in the secondary market via platforms provided by SFC-licensed virtual asset trading platforms (i.e., screen-based automated order matching).

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

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

11. Before launching trading arrangements, the product provider should, as necessary, cooperate with the relevant SFC-licensed virtual asset trading platform to test the tokenized product trading arrangements 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 supervision control measures to ensure fair pricing for trading tokenized products on the platform. Such measures should include:

    a) If the proposed trade price would deviate significantly from the relevant real-time or near real-time indicative net asset value per unit of the relevant product (the deviation threshold will be reasonably determined having regard to the characteristics of the relevant product), a warning should be issued to investors (price deviation warning)2

    b) Explain to investors that they may choose to subscribe or redeem based on net asset value (i.e., in the primary market, rather than secondary market trading), and the relevant implications arising from this3; and

    c) Implement system monitoring measures, pre-trade automated monitoring measures, and regular post-trade surveillance as set out in paragraph 11.13 of the Virtual Asset Trading Platform Guidelines, and other monitoring measures reasonably designed for the following purposes: preventing excessive price fluctuations (e.g., by setting trading band limits and a cooling-off period based on the last traded price for the relevant product), preventing market manipulation, and identifying any potentially suspicious market manipulation and non-compliant activities.

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

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

**Liquidity Provision**

15. Product providers should:

    a) Use their best efforts to put in place arrangements to ensure that each tokenized product has at least one market maker (Note: a Hong Kong market term meaning a market maker), and that, before a market maker terminates its market-making service, it will issue not less than three months’ prior notice;

    b) Closely monitor the secondary market trading activities and liquidity of their tokenized products, maintain close communication with the market makers they have engaged, develop appropriate contingency plans5, and take any necessary remedial actions where doing so is in the best interests of investors;

    c) Appoint distributors for its tokenized products. 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) Put in place arrangements with SFC-licensed virtual asset trading platforms to facilitate transfers between the 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 also be redeemed via the primary market).

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

    a) Conduct due diligence and regular monitoring of the performance of all market makers approved to access its platform, by reference to the terms agreed; and reasonably satisfy itself that the relevant market makers continue to have the relevant competence and adequate resources to properly carry out their market-making functions;

    b) Ensure that all market makers approved to access its platform continue to meet the established standards on the bid-ask spread, quote value, minimum quote maintenance duration, and participation rate;

    c) When any market maker approved to access its platform fails to fulfill the relevant responsibilities, contact the relevant market maker to effect corrective actions; and

    d) Specify in its agreement with market makers: (i) the eligibility criteria and responsibilities applicable to market makers of tokenized products; and (ii) the arrangements to be implemented when a market maker no longer provides services for a particular tokenized product.

17. Distributors and market makers should ensure compliance with all applicable laws, rules, regulations, and codes of conduct that are issued or enforced by the SFC and/or (where applicable) other regulators.

18. If product providers and/or SFC-licensed virtual asset trading platforms provide 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 Institutions of the SFC, and relevant provisions of the Securities and Futures Ordinance, in order to maintain market integrity and prevent market misconduct.

    Disclosure

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

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

    b) Key information about trading channels (e.g., operating procedures, settlement procedures, settlement times, pre-set funding requirements, differences between the secondary and primary markets, and whether tokenized products can be traded across channels in an interoperable manner8), market maker arrangements (including any remuneration and/or incentives that the product provider and/or the SFC-licensed virtual asset trading platform provides to market makers9), and indicative ranges of fees applicable to secondary market trading, together with a note directing investors to the SFC-licensed virtual asset trading platform website so that investors 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) A list of market makers for tokenized products (together with a note directing investors to the website of the latest list), and disclosure of any affiliated entity of the product provider acting as a market maker, together with disclosure of relevant potential conflicts of interest.

20. The SFC-licensed virtual asset trading platform and the connecting brokers should maintain or provide access to channels to specified online interfaces (e.g., websites or applications), in order to:

    a) Provide information disclosing details of secondary market trading arrangements for the relevant tokenized products, including trading channels, market maker arrangements (including any remuneration and/or incentives provided by the product provider and/or the SFC-licensed virtual asset trading platform to the market makers), market maker eligibility criteria, fee schedules, and bid/ask spreads10;

    b) Provide (i) real-time or near real-time indicative NAV per unit11 (typically updated at least once every 15 seconds during trading hours); and (ii) the latest NAV per unit12 of the tokenized products, including the data source and update frequency; and

    c) Emphasize to clients intending to participate in secondary market trading of tokenized products the relevant risks, such as liquidity risk and price deviation risk (trading may be very thin, and transaction prices may show a significant premium/discount to net asset value, particularly during periods outside normal trading hours for Hong Kong’s financial markets and during weekends), price fragmentation risk (including the fact that different trading channels may have different transaction prices), and the risk of reliance on market makers. Before opening accounts for clients 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 clients that they understand the above risks.

    Notification

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

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

    C. Pre-consultation, Application, and Approval

    For Product Providers

23. For new investment products with tokenization-related functions (primary market trading and/or secondary market trading) that require SFC approval, pre-consultation with the SFC is mandatory.

24. For existing SFC-recognized investment products intending to introduce tokenization-related functions (primary market trading and/or secondary market trading), pre-consultation with the SFC and obtaining its approval are mandatory.

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

26. For secondary market trading arrangements that have already been approved previously by the SFC (e.g., trading mechanisms, price deviation alerts, market maker arrangements, and new trading channels), product providers should pre-consult the SFC on 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 conduct OTC secondary market trading of tokenized products) should notify their case officer at the SFC13 before first commencing secondary market trading business, and discuss their plans with the case officer14. If there are subsequent material changes to the arrangements already communicated, the intermediary should also notify its case officer at the SFC and (where applicable) the Hong Kong Monetary Authority.

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 Surveillance Division

    1 Including the tokenized share class 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 NAV per unit, a price deviation warning is displayed on its investors’ trading interface.

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

    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 Institutions of the SFC.

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

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

    7 The market maker mechanism (including the market makers’ admission) is generally managed by the platform operator. In light of the fact that some market makers may directly contact the platform operator without consulting the product provider in order to participate in the market-making activities for a particular product, the main responsibility for accepting market makers and monitoring their performance rests with the platform operator.

    8 For avoidance of doubt, units of tokenized products may be transferred—for example, to support cross-channel trading of tokenized products in an interoperable manner.

    9 The purpose of the disclosures should be to help investors assess the liquidity and supply-demand conditions of tokenized products on SFC-licensed virtual asset trading platforms.

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

    11 Indicative NAV refers to a real-time indicative estimate of the NAV per unit of a tokenized product, calculated during trading hours on the SFC-licensed virtual asset trading platform for that product, and typically based on the most recent available market prices of the components in the product’s investment portfolio.

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

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

    14 Such notifications should be made as soon as reasonably practicable. For example, when product providers pre-consult the SFC under paragraphs 23 to 26, the relevant SFC-licensed virtual asset trading platform, SFC-licensed corporation, and registered institution should also notify the SFC and (where applicable) the Hong Kong Monetary Authority at the same time.