News update: Secondary Trading of Tokenised Authorised Investment Products Permitted in Hong Kong

News update: Secondary Trading of Tokenised Authorised Investment Products Permitted in Hong Kong

The Securities and Futures Commission in Hong Kong (SFC) continues to progressively use its 2025 ASPIRe regulatory roadmap and framework to advance the development and integration of the Web3 market in Hong Kong. In this news update, Pádraig Walsh from our Fintech practice, looks at the circular published by the SFC on 20 April 2026 (“Secondary Trading Circular”) that sets out an update to regulatory framework for tokenised SFC-authorised investment products (“Tokenised Products”) in Hong Kong.

Background

On 2 November 2023, the Securities and Futures Commission (SFC) published two circulars that outlined a regulatory framework for security token offerings in Hong Kong (see our review of the prior circulars here). These circulars included guidance on the requirements for authorisation by the SFC for tokenised SFC-authorised investment products. The parameters were limited to primary dealing only. The SFC considered secondary trading activities needed more consideration to ensure the regulatory framework could provide the appropriate level of investor protection.

The SFC has since noted that, as of March 2026, 13 Tokenised Products were offered to the public in Hong Kong, with the assets under management of their tokenised classes increasing around seven-fold to $10.7 billion over the past year.

A key part of the ASPIRe framework is to open up products and access in the Web3 ecosystem in Hong Kong. The SFC wishes to support the tokenisation and trading of tokenised bonds, funds and other instruments. The purpose of the Secondary Trading Circular is to allow licensed virtual asset trading platforms in Hong Kong (“VATPs”) to offer secondary on-platform trading of Tokenised Products. The intention is to broaden trading venues, enhance liquidity and reinforce the development of a blockchain‑enabled financial infrastructure within clear regulatory guardrails.

Key requirements

The following are key requirements set out in the Secondary Trading Circular for secondary trading of Tokenised Products:

• Trading channel: Product providers must test trading arrangements with relevant licensed VATPs before launch to confirm operational and system readiness. Product providers may only execute trades when the client has sufficient funds or equivalent holdings to cover the trade.
• Fair pricing: Licensed VATPs must implement risk controls. These must include price deviation alerts, notices to investors on primary market alternatives and system monitoring that prevents excessive fluctuations and manipulation.
• Liquidity provision:

Product providers must appoint a market maker for each Tokenised Product, monitor secondary market liquidity, appoint SFC-licensed distributors, and have arrangements to facilitate primary and secondary market transfers of Tokenised Products.

Licensed VATPs must conduct due diligence, ensure appropriate commitment, arrange to rectify any short comings of obligations, and impose specific obligations and arrangements for particular Tokenised Product in respect of the relevant market makers.

• Disclosure: The offering document should describe the risks and information associated with secondary trading of the Tokenised Products, including liquidity and price deviation risks, and explain when the platform may suspend secondary trading of Tokenised Products.
• Notification: Product providers should alert the SFC early to issues that may adversely affect the operations, secondary trading, or liquidity of their Tokenised Products.

SFC prior consultation and approval

Product providers will need authorisation, prior consultation and SFC approval as applicable when introducing new products with tokenisation features. Intermediaries, including licensed VATPs, must notify and discuss their proposals with their case officers before engaging in secondary trading of Tokenised Products for the first time and later upon any material changes to arrangements.

Analysis

The Secondary Trading Circular can be viewed through the lens of the SFC’s approach to tokenised products generally. At this stage, the SFC is more comfortable with taking traditional financial products generally (bonds, funds) and applying the “same business, same risks, same rules” ethos to tokenisation of those products. This is not RWA tokenisation for the purists. It is a pragmatic path to opening more regulated routes involving the benefits of blockchain technology. The initiative allows a tokenised form of a traditional securities product to be traded in the evening and on weekends, and to be supported by the use of regulated stablecoins and tokenised deposits to facilitate liquidity. This is progressive, beneficial and timely.

The SFC has continued to focus on investor protection. Product providers, VATPs and intermediaries must adopt safeguards that typically apply to listed secondary-market trading. These include execution standards, pricing controls, liquidity support and disclosure. Providers and intermediaries considering introducing Tokenised Products should review their governance and operational readiness early, update client-facing disclosures, and engage the SFC for prior consultation or approval. These are not light touch requirements. There is a material compliance cost involved. Investor protection is still the key touchstone.

Conclusion

The Secondary Trading Circular demonstrates the SFC’s continued push to provide a clear pathway for retail traditional finance products to use Web3 infrastructure. This marks a further step and enhancement of Hong Kong’s Web3 ecosystem.

Pádraig Walsh and Jack Lee

If you want to know more about the content of this article, please contact:

Pádraig Walsh
Partner | Email

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. This article was last reviewed on 31 March 2026.