Source: Hong Kong Securities and Futures Commission (SFC)

Note: Ye Zhiheng, Executive Director of the Intermediaries Division of the Hong Kong SFC, revealed during a keynote speech at the 2026 Hong Kong Web3 Carnival held on the morning of April 26 that an announcement would be made this afternoon on allowing the first tokenized asset trading framework worldwide, covering not only tokenized money market funds but also all authorized assets. As scheduled, the Hong Kong SFC website published this new regulatory framework on the afternoon of April 26, allowing SFC-recognized tokenized investment products to be traded in the secondary market. Below are the regulatory documents issued by the Hong Kong SFC:

I. New Regulatory Framework Permitting SFC-recognized tokenized products to be traded in the secondary market

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

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

Since the SFC first specified a regulatory framework related to tokenization at the end of 2023, product issuers in Hong Kong have been actively implementing tokenization of their products and seizing relevant market opportunities (Note 1). As at March 2026, 13 tokenized products have been offered to the Hong Kong public. Over the past year, the total assets under management of their tokenized class of shares increased by about sevenfold to approximately RMB 10.7 billion.

In view of this, it is timely to promote round-the-clock secondary market trading. This can further promote the integration of tokenized products with the Web3 ecosystem through the potential use of regulated stablecoins and tokenized deposits in relevant trading (Note 2). To address liquidity and investor protection issues arising from secondary market trading of tokenized open-ended funds—especially when trading occurs outside the normal trading hours of the relevant portfolio securities—the new measures take the operation of exchange-traded funds and SFC-licensed virtual asset trading platforms as a reference. The measures cover fair pricing, orderly trading, liquidity provision and information disclosure.

The SFC Chief Executive Officer, Ms. Leung Fung-yee, stated, “In the process of building a digital asset ecosystem in Hong Kong, this new regulatory framework marks another important milestone. This end-to-end comprehensive ecosystem will combine innovation and scalability and also provide robust investor protection. The new initiative allows traditional securities products, after tokenization, to be traded at night and on weekends. By using regulated stablecoins and tokenized deposits, it also promotes round-the-clock liquidity, thereby responding to 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 operations of the relevant products and will consider expanding the scope of products in due course.

The SFC encourages product issuers and intermediaries (including SFC-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 SFC-Recognized Investment Products” (English only) and “Circular on Activities Relating to Tokenized Securities Undertaken by Intermediaries”), thereby setting out the regulatory framework for tokenized products and activities relating to tokenized securities.

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

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

1. The Securities and Futures Commission (SFC) will, based on the various provisions set out in this circular, consider permitting the trading in the secondary market by the Hong Kong public of SFC-recognized tokenized 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 Relating to Tokenized Securities Undertaken by Intermediaries” (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 the support of the Government, relevant local authorities and the industry, Hong Kong has become a hub for financial innovation, covering a range of cutting-edge developments including tokenization. Among them, 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 stage of development and enhance market scalability, the SFC will permit tokenized products to be traded in the secondary market, thereby enhancing their tradability and further integrating them into Hong Kong’s Web3.0 ecosystem. For this purpose, the experience of Hong Kong’s robust exchange-traded fund (ETF) market and operators of SFC-licensed virtual asset trading platforms in recent years provides practical reference value and lays a solid foundation for achieving the above goals.

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

6. The provisions are mainly designed to facilitate secondary market trading on the platform of SFC-recognized open-ended funds. The SFC will consider, where appropriate, including by way of amended provisions, admitting other types of products.

   B. Provisions on Secondary Market Trading of Tokenized Products

7. Product providers should ensure that the relevant products comply with the applicable requirements in the relevant rules and regulations and the product code (including the qualifications of product providers, product structure, investment and operational requirements, disclosure, and continuing compliance obligations).

   Trading Channels

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

9. Secondary market 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”), applying the existing trading operation, rules and risk monitoring measures applicable to the trading of virtual assets on that platform.

10. For secondary market trading of tokenized products on the platform, SFC-licensed virtual asset trading platforms should execute trades for a client only when the client has sufficient funds in its account with the platform operator or has holdings of products of equivalent trading interchangeability.

11. Before the launch of trading arrangements, product providers should, as required, collaborate with the relevant SFC-licensed virtual asset trading platform 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. SFC-licensed virtual asset trading platforms should implement effective risk management and supervisory control measures to ensure that secondary market trading of tokenized products on the platform is fairly priced. Such measures should include:

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

    b) explaining to investors that they may choose to subscribe or redeem based on net asset value (i.e., in the primary market, rather than in secondary market trading), and the relevant implications3; and

    c) implementing system monitoring measures, pre-trade automated controls and periodic post-trade surveillance 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 volatility (e.g., setting trading band limits and cool-off periods based on the last transaction price of the relevant product), preventing market manipulation, and identifying any suspicious market manipulation and breaches of compliance.

13. Similarly, when facilitating its clients’ secondary market trading of tokenized products on the SFC-licensed virtual asset trading platform (via a connecting broker)4, SFC-licensed corporations or registered institutions should ensure that their trading interfaces display price deviation warnings to investors, and explain to investors 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, the 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 at least one market maker will provide not less than three months’ prior notice before terminating its market-making services;

    b) closely monitor secondary market trading activities and liquidity of their tokenized products, maintain close communication with their appointed market makers, develop appropriate contingency plans5 and, where consistent with the best interests of investors, take the required remedial actions;

    c) appoint distributors for their 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 a small number of circumstances6; and

    d) put in place arrangements with SFC-licensed virtual asset trading platforms to facilitate transfers between the primary and secondary markets for tokenized products (for example, 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. SFC-licensed virtual asset trading platforms7 should:

    a) conduct due diligence and regularly monitor the performance of all market makers approved to access their platform by reference to the terms agreed; and reasonably satisfy themselves that such market makers continue to have the relevant competence and adequate resources to properly perform their market-making functions;

    b) ensure that all market makers approved to access their platform continuously comply with the established standards in respect of bid-ask spreads, quote value, the minimum duration for which quotes are maintained and participation rate;

    c) when any market maker approved to access their platform fails to discharge its relevant responsibilities, liaise with the relevant market maker for rectification; and

    d) specify in their agreements 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 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 (where applicable) other regulators.

18. Where product providers and/or SFC-licensed virtual asset trading platforms provide remuneration and/or incentives to support market maker activities for 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 under the Securities and Futures Commission, and the relevant provisions of the Securities and Futures Ordinance, in order to maintain market integrity and prevent market misconduct.

    Disclosure

19. The offering documents (including the product key facts statements) for tokenized products offered for secondary market trading should clearly set out:

    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 be subject to significant premiums/discounts relative to net asset value, particularly during times outside the normal operation of the Hong Kong financial markets and during weekends), price fragmentation risk (including that different transaction prices may be available through different trading channels), and risks relating to reliance on market makers;

    b) key information on trading channels (e.g., operational processes, settlement procedures, settlement time, 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, and attach notes to guide investors to the websites of the relevant SFC-licensed virtual asset trading platform to understand details of 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 (with notes guiding investors to the latest list website), and any affiliated entities of the product provider that act as a market maker, together with disclosures of relevant potential conflicts of interest.

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

    a) disclose information on 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 product providers and/or SFC-licensed virtual asset trading platforms to market makers), market maker eligibility criteria, fee schedules, and bid-ask spreads10;

    b) provide indicative unit net asset value (i) real-time or near-real-time11 (typically updated at least once every 15 seconds during trading hours); and (ii) the latest unit net asset value of the tokenized products12, and state the data sources and update frequency; and

    c) highlight to prospective clients who intend 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 be subject to significant premiums/discounts relative to net asset value, particularly during times outside the normal operation of Hong Kong financial markets and during weekends), price fragmentation risk (including that different transaction prices may be available through different trading channels), and risks relating to reliance on market makers. Before SFC-licensed virtual asset trading platforms and connecting brokers open accounts for clients who intend to participate in secondary market trading of tokenized products, they should obtain the clients’ confirmation that they have understood the above risks.

    Notification

21. In general, product providers should notify the SFC in advance of any abnormal situations concerning the tokenized products they manage, including but not limited to matters that may have an adverse effect on the operation, secondary market trading and liquidity of their tokenized products (including receipt of a notice of resignation from the last market maker).

22. If the following situations occur, product providers should notify the SFC and investors immediately as soon as practicable: (i) termination or suspension of trading of tokenized products in the primary or secondary market; or (ii) termination, interruption or suspension of market maker activities. In such notice, product providers should include an assessment of the impact of the relevant event on the tokenized products they manage, 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) and requiring SFC approval, prior consultation with the SFC is required.

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

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

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

    For Intermediaries Engaged in Secondary Market Trading of Tokenized Products

27. Before an intermediary (including an SFC-licensed virtual asset trading platform and an intermediary intending to engage in OTC secondary market trading of tokenized products) first carries out secondary market trading business, it should notify its case officer of the SFC13 and discuss its proposal with the case officer14. If there are any material changes subsequently made to the arrangements communicated, the intermediary should also notify its case officer at the SFC and, where applicable, the HKMA.

28. If you would like 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 Division Intermediaries Division Market Supervision Division

    1 This includes the tokenized classes of SFC-recognized investment products.

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

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

    4 A connecting broker refers to an entity that transmits clients’ secondary market trading instructions to an SFC-licensed virtual asset trading platform. Connecting brokers should comply with Clause 18 and Schedule 7 of the Code of Conduct for Licensed Persons or Registered Institutions under the Securities and Futures Commission.

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

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

    7 The market maker mechanism (including market maker admission) is generally managed by the platform operator. As some market makers may contact the platform operator directly without engaging its product provider, the primary 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 relevant disclosures should aim to help investors assess the liquidity and supply-demand of tokenized products on SFC-licensed virtual asset trading platforms.

    10 In addition to 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 net asset value refers to an indicative real-time estimate of the net asset value per unit of a tokenized product. It is calculated during the trading hours of the tokenized product on the SFC-licensed virtual asset trading platform, and is generally based on the most recently available market prices of the product’s portfolio components.

    12 Latest net asset value refers to the latest official net asset value per unit of a tokenized product, calculated at the relevant valuation time point on the most recent primary market trading day in accordance with its constitutive documents.

    13 According to the “Circular on Activities Relating to Tokenized Securities Undertaken by Intermediaries,” registered institutions should also notify the Hong Kong Monetary Authority.

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