Hong Kong's Virtual Asset Market Enters a New Chapter: SFC Releases "A-S-P-I-Re" Roadmap

On February 19, 2025, the Hong Kong Securities and Futures Commission (SFC) officially released the "Virtual Asset Roadmap" to address various challenges in the development of the virtual asset trading market in Hong Kong.

The roadmap known as "A-S-P-I-Re" starts from five key aspects: Access, Safeguards, Products, Infrastructure, and Relationships, proposing 12 major measures that clarify Hong Kong's comprehensive development and regulatory direction in the virtual asset sector in the coming years.

Background of Roadmap Development

As one of the global financial centers, Hong Kong began exploring a regulatory framework for virtual assets as early as 2018. In 2023, the SFC included virtual asset trading under its regulatory scope, requiring virtual asset trading platforms (VATP) to obtain licenses and introducing investor protection measures consistent with traditional finance. In April 2024, the first virtual asset spot exchange-traded funds (ETFs) in Asia were successfully listed on the Hong Kong Stock Exchange.

However, the virtual asset market in Hong Kong still faces some challenges:

1. Insufficient market activity: Although the global market value of virtual assets exceeds $30 trillion in 2024, with an annual trading volume reaching $70 trillion, the scale of the Hong Kong market remains relatively limited. As of December 6, 2024, the total trading volume of cryptocurrency spot ETFs in Hong Kong has surpassed $58 million, setting a new historical high, but it still lacks sufficient industry giants and capital inflow.

2. Market access restrictions: Mainland investors, as the largest potential group, are unable to participate in compliance, while users from other regions tend to trade within their jurisdiction or on globally mainstream exchanges, leading to a disconnection between the Hong Kong market and other international financial centers.

3. Limited product categories: Virtual asset trading in Hong Kong mainly focuses on mainstream cryptocurrencies such as Bitcoin and Ethereum, with smaller trading volumes for other cryptocurrencies. Licensed trading institutions have limited development in the field of derivative innovation, and tokenized funds are still in the exploratory stage.

At the same time, the United States has seized the initiative in the virtual asset market and trading volume. Therefore, Hong Kong urgently needs to find new breakthroughs to cope with the global competition in virtual assets.

Overview of the "A-S-P-I-Re" Roadmap: Five Pillars Supporting the New Ecosystem of Virtual Assets

1. Pillar A (Access) - Simplifying market access and providing a clear regulatory framework

Objective: To establish a clear and transparent licensing framework to attract high-quality virtual asset service providers to Hong Kong.

Measures:

• Consider establishing a licensing system for OTC trading and asset custody services.
• Allow the establishment of a two-tier market structure that separates trading from custody, facilitating the entry of institutions and liquidity providers into the Hong Kong market.

2. Pillar S (Safeguards) - Strengthening Compliance and Prevention

Goal: Provide clear regulatory guidance to align the virtual asset market with traditional financial frameworks.

Measures:

• Researching the regulatory framework for new token listings and virtual asset derivatives trading aimed at professional investors.
• Clarify investor access requirements and product classification to ensure that investors obtain products suitable for their risk tolerance.
• Adjust the ratio requirements of hot and cold wallets, and introduce diversified insurance and compensation mechanisms.

3. Pillar P (Products) - Expand product categories, investment tools, and service innovations

Objective: Provide multi-level, differentiated investment tools based on the different risk tolerance of investors.

Measures:

• Explore new coin listings and virtual asset derivatives trading exclusive to professional investors.
• Explore the collateral financing requirements for virtual assets, in line with the risk management measures of the securities market.
• Consider providing staking and lending services under clear custody and operational guidelines.

4. Pillar I (Infrastructure) - Upgrade regulatory infrastructure

Objective: Enhance market supervision capabilities, utilize advanced data analysis and monitoring tools, and improve inter-agency collaboration and market monitoring capabilities.

Measures:

• Deploy a data-driven blockchain monitoring platform, considering the use of a direct digital asset information reporting solution to detect illegal activities.
• Promote cross-border cooperation with global regulatory agencies

5. Pillar Re (Relationships) - Promoting communication and education for investors

Goal: To enhance the awareness and risk prevention capabilities of investors and industry participants regarding virtual assets through extensive information exchange and education training.

Measures:

• Establish a cooperation mechanism with financial influencers to regulate investor promotion channels.
• Establish a sustainable industry communication and talent cultivation network to promote long-term market development.

Market Outlook

In 2024, the global virtual asset market experienced a reshaping of its landscape. A significant rise in tech stocks, ongoing expansion of payment channels, changes in global liquidity dynamics, and geopolitical factors intertwined, giving rise to new market chemical reactions while also exposing some potential issues.

From the perspective of the participants, the market shows a coexistence of institutional investors and retail investors. However, some "whales" with excessively high positions bring risks of market manipulation. The top 2% of Bitcoin wallet addresses control about 95% of the supply, along with the existence of many "ancient wallets," which further exacerbates the imbalance in the market and limits overall activity.

In terms of trading models, there is a serious phenomenon of differentiation. Centralized trading platforms account for half of the global trading volume, but the market structure has formed, with mainstream exchanges in a dominant position, making it difficult for new entrants to get a share. Although decentralized trading platforms can meet specific needs, they expose users to risks such as smart contract vulnerabilities and scams due to the lack of standardized protective measures.

Looking ahead to 2025, Hong Kong's virtual asset market is expected to open a new chapter. The "A-S-P-I-Re" roadmap released by the SFC proposes many innovative measures that balance regulation and promotion.

1. Strengthen regulatory efforts comprehensively, including considering the establishment of a licensing system for custodians to achieve comprehensive coverage of virtual asset trading platforms.

2. Promote market development, such as considering allowing virtual asset pledging, which may bring about threefold benefits of capital appreciation, enhanced asset liquidity, and increased cash flow returns.

3. Emphasize investor education, which is a crucial aspect that many regulators have previously overlooked but is extremely important. Only with investor education keeping pace can Hong Kong's virtual asset development blueprint truly thrive.

If the initiatives and goals in the "A-S-P-I-Re" roadmap are successfully implemented, Hong Kong is expected to create a more active market, a diverse range of innovative investment strategies, and a more transparent and secure regulatory environment for virtual asset investments in the coming years. From its global ecological position, Hong Kong is also expected to occupy an important position in the global virtual asset landscape, leading the innovation and development of the global virtual asset market.