On 7 April 2025, the Securities and Futures Commission (“SFC”) issued circular 25EC22 setting out its regulatory approach to the provision of staking services by SFC-licensed virtual asset (“VA”) trading platforms (“VATPs”) to their clients.
On the same day, the Hong Kong Monetary Authority also issued a similar circular in respect of authorized institution (“AIs”) and subsidiaries of locally incorporated AIs that provide staking services from custodial services to their clients.
Together, the two circulars elucidate Hong Kong’s regulatory approach to crypto staking.
A. Background
Pursuant to paragraph 7.26(b) of the SFC’s Guidelines for Virtual Asset Trading Platform Operators published on 1 June 2023, VATPs were effectively prohibited from providing staking services.
Given the increasing demand for staking services and the development of the VA ecosystem in Hong Kong since those initial guidelines, the SFC and HKMA have adjusted their regulatory stance to allow VATPs/AIs to provide staking services to clients. For SFC-licenced VATPs, this will be subject to modifications of the conditions imposed on the VATP licence.
B. What are staking services?
The circulars define staking services as “any arrangements which involve the process of committing or locking client VAs for a validator to participate in a blockchain protocol’s validation process based on a proof-of-stake consensus mechanism, with returns generated and distributed for that participation” (“staking services”).
C. New Regulatory Requirements
Set out below is a summary of the latest regulatory requirements for VATPs/AIs that wish to provide staking services:
1. Internal Controls
- Direct Custody Requirement: VATPs/AIs must maintain full control over all withdrawal mechanisms for staked client assets. Third-party custody of client assets is prohibited.
- Prepare operational rules governing the provision of Staking Services.
- Regulatory Reporting: VATPs/AIs must provide the SFC/HKMA with any requested information regarding their staking operations.
- Risk Management Policies: VATPs/AIs must implement effective policies to:
- Detect and prevent errors or misconduct related to their staking services.
- Safeguard staked assets
- Manage operational risks and conflicts of interest.
2. Disclosure of Information
VATPs/AIs must clearly disclose the following:
- Details of Staking Service:
- Supported VAs for staking.
- Involvement of third parties (if any).
- Fees, lock-up periods, unstacking procedures, outage protocols, business resumption arrangements and custodial arrangements
- Risk Warnings:
- Disclose specific risks associated with staking (e.g., slashing, hacking, validator failures).
- Legal uncertainties affecting client rights to staked assets.
- How potential losses will be handled.
- Blockchain Protocol Selection & Third-Party Service Providers
- Protocol Selection:
VATPs/AIs must:- Act with due skill, care and diligence when including a blockchain protocol for providing staking services.
- Conduct all reasonable due diligence on the blockchain protocol for staking.
- Ensure their systems, technology and infrastructure can support the provision of staking services and manage associated risks (e.g., technical vulnerabilities).
- Third-Party Providers (if used):
VATPs/AIs must perform proper due diligence and conduct ongoing monitoring on the third party (e.g. the providers’ experience, security controls, and risk mitigation measures).
- Are Approvals Required?
- SFC-licenced VATPs must obtain prior written approval from the SFC before offering staking services. The SFC will attach specific licensing conditions (outlined in the Appendix to the Circular).
- Before engaging in staking services, an AI should discuss with the HKMA in advance.
D. Conclusion
By mandating robust custody safeguards, transparent risk disclosures, rigorous platform approvals, Hong Kong is sending a clear message that it is open for serious virtual asset business, and it is placing itself as a premier regulated environment for crypto yield products. The framework transforms staking from niche activity to mainstream investment class – with compliant platforms positioned to capture the growing VA industry.
For more information, contact our Fintech and Regulatory team today.