Regulators move on plans to open Hong Kong's $21T crypto derivatives market to pro traders

Hong Kong’s Securities and Futures Commission (SFC) is moving to open crypto derivatives trading for professional investors, marking a significant step in the city’s digital asset evolution. The decision follows a wider regulatory push to tap global capital in its growing virtual asset market by encouraging institutional involvement.

The SFC’s upcoming derivatives framework targets a market surpassing spot crypto trading in size and velocity. TokenInsight data shows that crypto derivatives traded $21 trillion in Q1 2025 instead of $4.6 trillion in spot trades. These include futures and options, which provide the advantages of greater liquidity and hedging opportunities for the sophisticated trader.

Leading industry stakeholders have advocated for Hong Kong crypto derivatives for quite some time. Deribit’s chief commercial officer, Jean David Péquignot, referred to it as a key part of the city’s virtual asset framework. Earlier this year, Péquignot spoke of the challenge of getting more institutional participants due to the lack of derivatives regulations.

Amid intense competition among the world’s global financial centers, there is an uptick towards institutional-grade infrastructure. In response, Hong Kong is sculpting its tax incentives and legal frameworks to position itself as Asia’s most favored crypto hub.

Stablecoin law passes as policy framework grows

In May, regulations were approved for stablecoins in Hong Kong’s Legislative Council, further aligning with international regulatory standards. The law also introduces a licensing scheme for fiat-referenced stablecoins that will further boost investors’ trust in digital assets tied to real-world currencies.

Paul Chan, the Financial Secretary, said the new legislation is vital for providing a platform to build more sophisticated financial products. Most recently, the region’s authorities launched virtual asset spot ETFs and inverse futures products to diversify its digital market further.

There are also steps being taken to refine the broader tax regime. Hong Kong officials said digital assets could soon be eligible for tax concessions now given to investment funds, single-family offices and carried interest structures. This could also attract more high-net-worth investors and global asset managers to take part in the city’s crypto ecosystem.

The government is also streamlining licensing, tax, and compliance navigation for digital finance companies operating in the Greater Bay Area and mainland China, with support from Invest Hong Kong and the Hong Kong Key Enterprises Office.

Second policy statement and global alignment ahead

A second virtual asset policy statement will be published by the SFC later in 2025. Further integration of Web3 infrastructure into mainstream finance and further clarification on rules surrounding custodial responsibilities, risk disclosures, and investor classification are expected in the announcement.

In September 2024, Hong Kong regulators said they would implement crypto OTC derivatives reporting standards established by the European Securities and Markets Authority (ESMA). The move aligns the oversight of the city closer to international norms and could be attractive to institutions that want regulatory certainty.

Asia’s first spot crypto ETFs have been launched in Hong Kong, as well as nine virtual asset trading platform (VATP) licenses thus far. Over 1,100 fintech firms are based in the territory, with eight digital banks, four virtual insurers, and 10 regulated digital asset platforms.

Hong Kong’s current trajectory was based on the original 2022 policy framework. The move comes after China banned crypto throughout the country, leaving Hong Kong as a regulated alternative across the region. However, since then, the crypto firms displaced by mainland restrictions have shown keen interest in the city.

Hong Kong was ranked second most crypto-friendly city after Ljubljana, Slovenia, by migration advisory platform Multipolitan in a recent report. The ranking was on the basis of infrastructure, regulation, and innovation support.

The report fits with the government’s goals. At the Consensus conference, Financial Secretary Chan affirmed that the city’s strategy is consistent with its “commitment to building a thriving digital asset ecosystem.”

KEY Difference Wire helps crypto brands break through and dominate headlines fast