1. Opening Global Liquidity Pools: Shared Order Book Rules
The Hong Kong Securities and Futures Commission (SFC) announced on 3 November 2025 that licensed Virtual Asset Trading Platform Operators (VATPs) can now integrate their order books with affiliated virtual asset trading platform operators (OVATPs). This innovation — called a Shared Order Book — allows trades originating in Hong Kong to be matched with buy/sell orders from around the world, significantly deepening liquidity for local investors and market participants.
Key Compliance Requirements:
Joint Management and High Bars for Overseas Partners: To participate in a Shared Order Book, VATPs must only partner with OVATPs that are properly licensed in jurisdictions that are members of the Financial Action Task Force (FATF) or similar regional bodies. These partners must also follow international standards — including those from International Organization of Securities Commissions (IOSCO) — with strong controls on anti-money laundering, client asset protection, and market abuse.
Managing Cross-Border Settlement Risks: Unlike Hong Kong’s current model of pre-funded, and instant settlement, the shared liquidity introduces cross-border settlement exposure. That means trades may not settle immediately, and platforms must be prepared to manage delays or failures.
To address this:
- Only pre-funded orders are allowed, with assets held by designated custodians.
- A delivery-versus-payment (DVP) system must be in place, with daily settlement and interim controls if exposures rise.
- Pplatforms are required to maintaining a reserve fund and implement robust safeguards to manage settlement risk.
Market Surveillance and Data Sharing: With order books covering multiple jurisdictions, market misconduct risk increases. VATPs need to coordinate surveillance with their partners to conduct surveillance, appoint a responsible officer for oversight, and give the SFC access to complete trade/order data on request.
Transparency and Client Protection: Platforms are required to update customer disclosures to explain the new settlement and cross-border risks, potential conflicts of interest, and any differences in client protection outside Hong Kong.
SFC Approval: A VATP must not launch a shared liquidity pool without the SFC’s written consent and must follow all appended terms and conditions.
2. Broader Product and Custody Scope: New Rules for Expanding VATP Services
In a parallel circular released on the same day, the SFC set out new rules that substantially broaden the range of products and services that VATPs can offer.
Key Changes:
Token Admission Criteria Relaxed for Professional and Retail Investors: 12-month track record requirement dropped for certain virtual assets—including stablecoins—for professional investors. To expand product offerings, the SFC no longer requires virtual assets (including stablecoins) to have a 12-month track record before a VATP offers them to professional investors. Also, stablecoins issued by a licensed stablecoin issuer are not subject to the 12-month track record requirement and can be offered to retail investors. For other virtual assets offered to retail, the 12-month rule still applies.
Regardless, VATPs must always conduct proper due diligence before the listing, and if a token or stablecoin has less than a 12-month track record, this must be properly disclosed.
Distribution of Digital Asset-Related Products: Licensed VATPs may be allowed to distribute tokenised securities and other digital asset investment products — not just offer spot trading — if they update their licensing conditions and comply with Hong Kong’s rules for investment distribution. Platforms may open client accounts to hold these products, subject to regulatory approval.
Expansion of Custody Services: VATPs can now apply for SFC approval to provide custody for digital assets not traded on their own platform, subject to meeting robust risk management, technology, and KYC/AML standards.
Why These Changes Are Important
- Deeper and more efficient markets: Shared liquidity means Hong Kong will be able to match trades and form prices based on, and/or more aligned with global supply and demand, giving local users better prices and higher trade volumes.
- Wider, more modern product suite: The new rules let VATPs list new tokens faster for professional investors bring more stablecoin options to retail users.
- Investor protection & regulatory clarity: Despite regulatory relaxation and liquidity pool expansion, requirements for due diligence, risk management, and proper client disclosure remain rigid.
Conclusion
These reforms advance Hong Kong’s ambition to be a leading, globally integrated digital asset hub, making the city more competitive while keeping strong guardrails in place for investor protection and market integrity.
There have been criticisms in the Chinese Mainland, Hong Kong, and elsewhere about the relevance of Hong Kong’s Web3 efforts. Is Hong Kong building a closed Web3 ecosystem that is shut off from the rest of the Web3 world, and of questionable relevance internationally? How will Hong Kong’s Web3 ecosystem connect with the global markets? This latest regulatory development by the SFC is a step in the right direction in responding to this issue. Hong Kong’s VA exchanges can now share order books and connect their markets with exchanges around the world, subject to the SFC approving the arrangements. The SFC can be expected to take a pragmatic approach to this, keeping in mind regulatory and AML risks as well as Hong Kong’s goal of being a global leader in the international Web3 markets.
Watch out for our next article where we’ll break down practical steps for staying compliant and what you should be doing right now.
If your platform seeks to use the shared order book model or apply for new product/distirbution/custody capabilities, contact us today to map out the steps and ensure a seamless, compliant rollout.