Hong Kong Advances to Allow Secondary Trading of Tokenized Securities

Hong Kong’s tokenized asset market may be on the verge of a significant transformation. While retail investors currently can only subscribe to and redeem tokenized funds in the primary market, the Securities and Futures Commission (SFC) is working to enable their participation in secondary market trading as well. This change represents an important step toward democratizing access to these innovative financial products.

The Need to Open the Secondary Market

As revealed by ChainCatcher, Lo Hoi-sze, Deputy Director of the SFC’s Intermediaries Division, indicated that authorities are deepening their analysis of operational requirements, identifying potential risks, and establishing appropriate safeguards. The regulator is also in advanced stages of preparing guiding documents to support this change. The current major focus is on local tokenized money market funds, which could greatly benefit from increased liquidity through secondary trading on licensed Virtual Asset Trading Platforms (VATPs).

Ongoing Industry Dialogue on Allowing New Mechanisms

The SFC is not advancing this agenda in isolation. The commission has initiated preliminary consultations with various market participants to better understand operational and technical needs. This ongoing engagement demonstrates the regulatory willingness to allow innovation while maintaining consumer protection standards. Licensed VATPs, already operating under strict supervision, would be the natural intermediaries to offer these secondary trading services.

The Regulatory Principle Guiding the Transformation

In his speech, Lo emphasized a fundamental point that explains the SFC’s approach: tokenized securities are, in essence, identical to conventional securities, differing only in the technological layer that supports them. For this reason, the SFC will apply its well-established principle of “same business, same risk, same rules” to digital assets. This means the authority will not create a parallel regulatory regime but will extend the existing framework of protection and supervision to enable secure and structured secondary trading.

The initiative signals that Hong Kong remains committed to allowing its financial market to adapt to the realities of the digital economy without compromising the integrity or security of the system.