SFC Chief Credits Balanced Approach as Key to FTX Dodge
The head of Hong Kong’s securities watchdog spoke about its previously safety-focused regulatory approach to crypto that allowed it to largely avoid damage from the collapse of fallen exchange FTX. Now, the city is shifting gears towards growth.
Securities and Futures Commission (SFC) CEO Julia Leung spoke during the Hong Kong FinTech Week 2025 about the need to take a balanced approach to new innovations in finance, such as digital assets, weighing the benefits of business and growth with the risk of jeopardizing investor safety.
She specifically cited the landmark collapse of crypto exchange FTX as an example of how the regulator’s prudence paid off.
«When FTX was still riding high, people were saying that you're driving liquidity, you're driving talents to other places in this region,» Leung said during a fireside chat at the event. «You can say that we are on the tougher side, but then once we are sure that we are able to protect the investors, we do relax.»
Enhanced Liquidity and Product Offering
Relaxation is indeed underway as the SFC issued two circulars focused on enhancing digital asset exchanges' access to global liquidity and product offerings.
The first circular allows licensed exchanges to combine local orders with those of affiliated overseas platforms in a shared order book. The second circular eases product access, including the waiver of a requirement for a 12-month track record for professional investors, licensed stablecoins, tokenized securities and custody of digital assets not being traded on platforms.
Safeguards, Harmonization
On liquidity access, Leung stressed that there would still be a focus on risks, such as the potential collapse of platforms abroad and manipulation. There will be «sufficient safeguards« including the requirement for overseas affiliated platforms to have pre-funding, joint surveillance programs and reserve funds locally for compensation.
On the other hand, the SFC is also collaborating with other regulators and jurisdictions on the harmonization of rules to create bigger markets.
«So in that sense, we are hoping that we are able to have the proper balance,» she added.
Regulatory Gaps
Nonetheless, there are still more efforts underway to improve crypto regulations with gaps to be filled. This includes the inclusion of an anti-money laundering amendment for virtual asset (VA) management and stringent requirements for custody, especially with regard to the management of private keys.
«Given the high-risk nature of these VA custody, the SFC expects to license only the most robust and reliable players in Hong Kong, ensuring that this is a trustworthy environment,» Leung said. «So these two proposed regimes would be the final […] major pieces to the regulatory puzzle.»
Next Generation Investors
According to Leung, investor demand from younger generations is the main driver for emerging financial technologies, be it digital assets or instant settlements.
«I read the traditional financial newspaper for information; they get it from social media,» she remarked. «And so we as regulators should be agile. We [need to] think hard about what we need to do in order to mitigate the risks that come with all this instantaneous development.»
