Source: Hong Kong Securities and Futures Commission

Note: Yip Chi-hang, Executive Director of the Intermediaries Division of the Hong Kong SFC, revealed during the themed speech at the Hong Kong Web3 Carnival 2026 held on the morning of April 26 that an announcement would be made this afternoon regarding the approval of the world’s first tokenized asset trading framework, not limited to tokenized money market funds but including all authorized assets. The new regulatory framework was published on the SFC website as scheduled on the afternoon of April 26, allowing recognized investment products of the SFC to be traded in the secondary market. Below are the regulatory documents from the Hong Kong SFC:

1. New Regulatory Framework Permitting Recognized Investment Products to Be Traded in the Secondary Market

The Hong Kong Securities and Futures Commission (SFC) announced today a new regulatory framework to promote the trial of recognized tokenized investment products (tokenized products) in the secondary market in Hong Kong, aiming to foster the long-term development of digital asset trading activities and support the ecosystem’s further growth.

The SFC issued a circular (see below) containing new guidelines, primarily to facilitate recognized open-ended funds to be traded in the secondary market on licensed virtual asset trading platforms, expanding regulated trading services available to retail investors. However, the SFC may also consider, on a case-by-case basis, arrangements for over-the-counter secondary market trading.

Since the SFC first clarified the regulatory framework related to tokenization at the end of 2023, local product issuers have actively pursued tokenization of their products and seized related market opportunities (Note 1). As of March 2026, 13 tokenized products have been offered to the Hong Kong public, with the total assets under management of tokenized shares increasing approximately sevenfold to HKD 10.7 billion over the past year.

In view of this, enabling round-the-clock secondary market trading is timely, which can further promote the integration of tokenized products with the Web3 ecosystem through the potential use of regulated stablecoins and tokenized deposits in relevant transactions (Note 2). To address liquidity and investor protection issues in secondary market trading of tokenized open-ended funds (especially outside normal trading hours of related securities), the new measures draw on existing practices applicable to exchange-traded funds (ETFs) and licensed virtual asset trading platforms. These measures cover fair pricing, orderly trading, liquidity provision, and information disclosure.

Ms. Carrie Lam, CEO of the SFC, stated: “The new regulatory framework marks another important milestone in building Hong Kong’s digital asset ecosystem. This comprehensive ecosystem will be innovative and scalable, with robust investor protection. The new measures allow traditional securities products to be traded after tokenization during nighttime and weekends, and promote round-the-clock liquidity through the use of regulated stablecoins and tokenized deposits, responding to investor 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 operation of these products and consider expanding the scope of products in due course.

The SFC encourages product issuers and intermediaries (including 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 Recognized Tokenized Investment Products” (English only) and “Circular on Activities of Intermediaries Engaged in Tokenized Securities”), establishing the regulatory framework for tokenized products and activities related to tokenized securities.

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

2. Circular on Secondary Market Trading of Recognized Tokenized Investment Products

1. The Securities and Futures Commission (SFC) will consider, based on the provisions listed in this circular, permitting recognized tokenized investment products (tokenized products) to be traded by the Hong Kong public in the secondary market.

2. This circular should be read together with the (i) “Circular on Recognized Tokenized Investment Products” (English only) and (ii) “Circular on Activities of Intermediaries Engaged in Tokenized Securities” (collectively, the two tokenization circulars). The terms used herein have the same meanings as those defined in the aforementioned circulars.

   A. Background

3. In recent years, supported by government, local authorities, and industry, Hong Kong has become a hub for financial innovation, including tokenization and other cutting-edge developments. 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 phase of development and enhance market scalability, the SFC will permit secondary market trading of tokenized products to improve their tradability and further integrate them into Hong Kong’s Web3 ecosystem. The experience of Hong Kong’s robust ETF market and licensed virtual asset trading platform operators over the past few years provides practical reference and a solid foundation for achieving these goals.

5. Drawing on these experiences, the SFC has formulated the regulations listed in this circular regarding secondary market trading of tokenized products, covering trading channels, fair pricing, liquidity provision, disclosure, client onboarding, and notification. These rules aim to support fair and orderly secondary market trading of tokenized products.

6. These regulations are primarily designed to facilitate recognized open-ended funds to be traded in the secondary market on platforms. The SFC may consider, where appropriate, including through amendments, other types of products.

   B. Regulations on Secondary Market Trading of Tokenized Products

7. Product providers should ensure that their products comply with applicable rules and regulations, including the product code of conduct (covering provider qualifications, product structure, investment and operational requirements, disclosure, and ongoing compliance).

   Trading Channels

8. Retail investors may trade tokenized products in the secondary market via platforms provided by licensed virtual asset trading platforms (i.e., automated trading on screens).

9. Tokenized product trading on platforms should follow the “Guidelines for Virtual Asset Trading Platform Operators” (“VASP Guidelines”), applying existing trading operations, rules, and risk monitoring measures suitable for virtual asset trading on the platform.

10. For trading of tokenized products on the platform, licensed virtual asset trading platforms should only execute trades when clients hold sufficient funds or equivalent tradable holdings within their accounts.

11. Before launching trading arrangements, product providers should cooperate with relevant licensed virtual asset trading platforms to test the trading arrangements (including operational processes, risk controls, and system readiness) and ensure they are satisfactory.

**Fair Pricing**

12. Licensed virtual asset trading platforms should implement effective risk management and supervisory measures to ensure fair pricing of tokenized products in the platform. These measures should include:

    a) If the proposed transaction price deviates significantly from the real-time or near-real-time indicative net asset value (NAV) per unit of the product (with the deviation threshold reasonably set considering the product’s characteristics), a price deviation warning should be issued to investors (Price Deviation Alert)2

    b) Inform investors that they may subscribe or redeem at NAV (i.e., in the primary market), and explain the related implications3; and

    c) Implement system monitoring measures, pre-trade automated controls, periodic post-trade reviews as specified in paragraph 11.13 of the “VASP Guidelines,” and other reasonable controls designed to prevent excessive price fluctuations (e.g., setting trading limits and cooling-off periods based on last transaction prices), market manipulation, and to detect suspicious activities.

13. Similarly, licensed entities (corporations or registered institutions) facilitating client trading of tokenized products on licensed virtual asset trading platforms should ensure that price deviation warnings are displayed on their trading interfaces and that clients are informed of the option to subscribe or redeem in the primary market as per paragraph 12(b).

14. The SFC may require demonstration of trading interfaces, price deviation warnings, and/or other relevant interfaces.

**Liquidity Provision**

15. Product providers should:

    a) Make best efforts to establish arrangements ensuring at least one market maker (Note: Hong Kong market term, meaning a liquidity provider) for each tokenized product, and that at least one market maker provides at least three months’ prior notice before terminating their market-making services;

    b) Closely monitor secondary market trading activity and liquidity of their tokenized products, maintain close communication with appointed market makers, develop appropriate contingency plans5, and take remedial actions in the best interests of investors;

    c) Appoint distributors for their tokenized products, who should be licensed or registered entities capable of handling subscription and redemption requests from third-party investors, except in rare cases6; and

    d) Establish arrangements with licensed virtual asset trading platforms to facilitate transfers between primary and secondary markets (e.g., tokens subscribed via primary market can be traded conveniently in the secondary market, and tokens bought in the secondary market can be redeemed via the primary market).

16. Licensed virtual asset trading platforms7 should:

    a) Conduct due diligence and periodic supervision of all market makers approved on their platform, based on the agreed terms; reasonably believe that market makers remain competent and have adequate resources to perform their roles;

    b) Ensure all approved market makers continue to meet standards regarding bid-ask spreads, quote values, minimum quote duration, and participation rates;

    c) Address any non-compliance by market makers by contacting them for correction; and

    d) Include in their agreements with market makers: (i) the qualification criteria and responsibilities for market makers of tokenized products; and (ii) arrangements for when market makers cease providing 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 other regulators (if applicable).

18. If product providers and/or licensed virtual asset trading platforms offer remuneration and/or incentives to support market maker activities for tokenized products, they must comply with all applicable laws and regulations, including the “Code of Conduct for Licensed Persons and Registered Institutions” issued by the SFC and relevant provisions of the Securities and Futures Ordinance, to maintain market integrity and prevent misconduct.

**Disclosure**

19. Sales documents for secondary market trading of tokenized products (including product summaries) should clearly state:

    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 could significantly differ from NAV, especially outside normal trading hours and on weekends), fragmentation risk (different trading channels may have different transaction prices), and reliance on market makers;

    b) Main information about trading channels (e.g., operation processes, settlement procedures, settlement times, pre-set funding requirements, differences between primary and secondary markets, and whether tokenized products can be traded across channels in a seamless manner8), arrangements with market makers (including any remuneration and incentives provided by product providers and/or licensed virtual asset trading platforms), and indicative ranges of fees applicable to secondary market trading, with a note directing investors to the relevant licensed virtual asset trading platform’s website for detailed trading arrangements (see also paragraph 20(a));

    c) Situations where secondary market trading of tokenized products may be suspended;

    d) List of market makers for tokenized products (with a link to the latest list on the website), and disclosures of any affiliates of the product providers acting as market makers, along with potential conflicts of interest.

20. Licensed virtual asset trading platforms and connecting brokers should maintain or provide access to designated online interfaces (e.g., websites or apps) to:

    a) Disclose details of secondary market trading arrangements, including trading channels, market maker arrangements (including any remuneration and incentives), market maker qualification criteria, fee schedules, and bid-ask spreads10;

    b) Distribute (i) real-time or near-real-time indicative NAV11 (usually updated at least every 15 seconds during trading hours); and (ii) latest official NAV12, explaining data sources and update frequency; and

    c) Highlight relevant risks to clients intending to participate in secondary market trading of tokenized products, such as liquidity risk and price deviation risk (trading may be very thin, and transaction prices could significantly differ from NAV, especially outside normal trading hours and on weekends), fragmentation risk, and reliance on market makers. Before opening accounts for clients interested in trading tokenized products, licensed virtual asset trading platforms and connecting brokers should confirm that clients understand these risks.

**Notification**

21. Generally, product providers should notify the SFC promptly of any abnormal situations related to the tokenized products they manage, including but not limited to any events that could adversely affect their operation, secondary market trading, or liquidity (including notices of market maker resignation).

22. In cases such as the termination or suspension of trading of tokenized products in the primary or secondary market, or the termination, interruption, or suspension of market maker activities, product providers should notify the SFC and investors as soon as practicable, including an assessment of the impact on their managed tokenized products, remedial actions, and contingency plans.

    ( C. Pre-Consultation, Application, and Approval

    For Product Providers

23. New investment products with tokenization features (primary and/or secondary market trading) requiring SFC approval must be pre-consulted with the SFC.

24. Existing recognized investment products planning to introduce tokenization features (primary and/or secondary market trading) must also be pre-consulted with and approved by the SFC.

25. The SFC will evaluate each application on a case-by-case basis. Given the evolving nature of the tokenization market, the SFC may provide further guidance or impose additional requirements as appropriate.

26. For previously approved secondary market trading arrangements (e.g., trading mechanisms, price deviation alerts, market maker arrangements, and new trading channels), product providers should consult the SFC in advance of any significant proposed changes.

    For Intermediaries Engaged in Secondary Market Trading of Tokenized Products

27. Intermediaries (including licensed virtual asset trading platforms and intermediaries planning to engage in OTC secondary market trading of tokenized products) should notify their case officer at the SFC before commencing such activities and discuss their plans14. If they subsequently make significant changes to the arrangements discussed, they should also notify their case officer and, if applicable, the HKMA.

28. To clarify any part of this circular, please contact us.

Hong Kong Securities and Futures Commission                                 Hong Kong Securities and Futures Commission                                 Hong Kong Securities and Futures Commission
Investment Products Department                                                                 Intermediaries Division                                             Market Supervision Department

1. Including recognized tokenized investment product shares.

2. Licensed virtual asset trading platforms should ensure that when the proposed transaction price deviates beyond the specified threshold from the indicative NAV per unit, a price deviation warning is displayed on their trading interface.

3. Such notices should explain that subscriptions and redemptions are subject to )if applicable(: )i### normal primary market trading hours (e.g., Monday to Friday only); (ii) use of liquidity risk management tools; and (iii@ the “unknown price” pricing mechanism, where fund units are subscribed or redeemed at a calculated NAV that may be higher or lower than the prevailing secondary market price.

4. Connecting brokers refer to entities that transmit clients’ secondary market trading instructions to licensed virtual asset trading platforms. Connecting brokers should comply with the “Code of Conduct for Licensed Persons and Registered Institutions” paragraph 18 and Schedule 7.

5. Contingency plans should include: )i( whether to temporarily halt secondary market trading of tokenized products during primary market trading suspensions; and )ii( arrangements to ensure the appointment and activation of backup market makers when needed (especially under extreme market conditions).

6. See “FAQs on Exchange-Traded Funds and Listed Funds” (English only), Question 1, for applicable cases.

7. The market maker mechanism (including entry) is generally managed by the platform operator. Since some market makers may directly contact the platform operator without engaging with the product provider, the platform operator bears primary responsibility for accepting market makers and monitoring their performance.

8. To avoid doubt, units of tokenized products can be transferred, for example, to support cross-channel trading of tokenized products.

9. Disclosures should assist investors in assessing the liquidity and supply-demand conditions of tokenized products on licensed virtual asset trading platforms.

10. Besides the provisions in paragraph 20, licensed virtual asset trading platforms and connecting brokers should also comply with other existing disclosure requirements.

11. Indicative NAV refers to a real-time estimate of the NAV per unit of the tokenized product, calculated during trading hours on licensed virtual asset trading platforms, usually based on the most recent market prices of the product’s components.

12. Latest NAV refers to the most recent official NAV per unit of the tokenized product, calculated at the valuation time of the most recent primary market trading day, based on its constituent documents.

13. According to the “Circular on Activities of Intermediaries Engaged in Tokenized Securities,” registered institutions should also notify the HKMA.

14. Such notifications should be made as soon as practicable within reasonable scope. For example, when product providers consult the SFC under paragraphs 23-26, the relevant licensed virtual asset trading platforms, licensed corporations, and registered institutions should also notify the SFC and, if applicable, the HKMA.