The Securities and Futures Commission (SFC) has issued new guidance to extend virtual asset (VA) services to margin financing for licensed brokers providing VA dealing services (VA brokers), according to a statement by the Hong Kong financial regulator.

In addition, it set out a framework to guide virtual asset trading platforms (VATPs) in developing proposals for VA-related leveraged products intended for professional investors.

As part of its latest measures to expand product and service diversity under the ASPIRe Roadmap, the SFC is allowing VA brokers to offer VA financing to their securities margin clients, subject to sufficient collateral and robust investor safeguards. This would enable margin clients with strong credit profiles and collateral to participate more actively in VA trading, thereby enhancing Hong Kong’s market liquidity in a risk-controlled manner.

For licensed VATPs, the SFC has set out, for the first time, a high-level framework to guide them in developing perpetual contracts, which are leveraged instruments, for offering exclusively to professional investors.

This aims to support their risk management strategies and also deepen liquidity in the underlying spot market.

To further drive VA trading activity in Hong Kong, the SFC allows affiliates of licensed VATPs to act as market makers on their platforms, provided that strong safeguards are in place to mitigate conflicts of interest. The participation of these affiliates should provide licensed VATPs with an additional liquidity option.

“Our structured development approach based on the ASPIRe Roadmap is essential to scaling our digital asset market,” said Dr Eric Yip, the SFC’s executive director of intermediaries. “These targeted initiatives to enhance liquidity showcase the SFC’s unswerving commitment to developing Hong Kong’s digital asset market in a sustainable and collaborative manner.”