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Hong Kongʼs SFC Implements Comprehensive Custody Overhaul to Fortify Digital Asset Security in Licensed Exchanges Hong Kongʼs Securities and Futures Commission SFC has unveiled a sweeping overhaul of custody requirements for licensed virtual asset trading platforms, marking one of the most prescriptive digital asset safeguard regimes in Asia, according to a statement released last Friday, August 15th. The reforms place direct personal accountability on senior management for asset protection and aim to address gaps in custody, oversight, and operational controls identified during a recent cybersecurity review.

Exchanges must now maintain cold-wallet systems backed by certified hardware security modules HSMs, stored in physically secured vaults and accessible only through strict multi-party authentication. Withdrawals are limited to pre-approved, whitelisted addresses, and any changes require auditable approvals.

Platforms must also run 24/7 threat monitoring and immediately report potential breaches to the SFC. Importantly, the rules ban the use of smart contracts in cold storage, removing an entire class of vulnerabilities tied to on-chain exploits.