HK SFC Framework for Secondary Trading of Tokenised Funds

In April 2026, Hong Kong’s Securities and Futures Commission (SFC) published two circulars that together mark a significant step in the regulated development of tokenised funds and other tokenised investment products. The updated Circular on Tokenisation of SFC-authorised Investment Products and the new Circular on Secondary Trading of Tokenised SFC-authorised Investment Products move Hong Kong's tokenisation framework from product creation to active market participation, with direct implications for compliance teams across asset management, banking, insurance, and virtual asset trading platforms.

From Primary Dealing to Secondary Trading: What Has Changed

Tokenised funds are investment funds whose ownership interests are recorded digitally on a blockchain, rather than through traditional registry and paper-based systems. Primary dealing refers to the standard subscription and redemption of these products directly with the fund. Secondary trading, by contrast, allows investors to buy and sell tokenised funds between each other on a trading platform, in the same way shares or exchange-traded funds (ETFs) are traded on a stock exchange.

The SFC’s original November 2023 circular established the conditions under which tokenised SFC-authorised investment products could be created and distributed through primary dealing, covering tokenisation arrangements, disclosure requirements, intermediary obligations, and staff competence. At the time, the SFC explicitly deferred secondary trading, noting it would warrant more caution and careful consideration.

The updated April 2026 circular now formally incorporates secondary trading within its scope, cross-referencing the companion secondary trading circular. It also extends the prior consultation requirement to cover material changes to existing tokenisation arrangements, not just initial tokenisation proposals. For firms that already have tokenised funds in the market, this is an immediate compliance consideration. Any proposed material changes to an existing, SFC-approved tokenisation arrangement now require prior engagement with the regulator before implementation.

What the New Secondary Trading Framework Requires

The secondary trading circular establishes a pilot framework built around four areas that are important for compliance teams to understand.

Trading Channel

Secondary trading may take place on-platform via SFC-licensed virtual asset trading platforms (VATPs), following existing VATP operating rules. The SFC may also consider over-the-counter (OTC) arrangements, where trades are negotiated directly between parties rather than on a centralised platform, on a case-by-case basis. The initial product scope focuses on tokenised money market funds, with the SFC reserving discretion to expand the range following a review of initial operational experience. It is worth noting that as of early 2026, only around a dozen VATPs hold SFC licences, and not all may have the infrastructure or appetite to support tokenised fund trading. This makes the OTC carve-out commercially significant for firms exploring this space, not simply a regulatory footnote.

Fair Pricing

VATPs must implement a Price Deviation Alert when execution prices deviate significantly from the product's real-time or near real-time indicative net asset value (NAV), typically updated at least every 15 seconds. Investors must be informed of the primary market alternative, and trading band controls with cooling-off periods are required to prevent excessive price fluctuation and market manipulation.

Liquidity Provision

Product Providers must arrange at least one market maker per tokenised fund. A market maker is a firm that commits to continuously quoting buy and sell prices to ensure investors can trade at any time. A minimum three-month notice period is required before termination of any market making arrangement. Importantly, market makers must maintain this continuous quoting capacity across evenings, weekends, and public holidays, when the underlying assets of many funds may not be actively trading and reliable pricing data may be limited. VATPs must conduct ongoing due diligence on market makers and enforce bid-ask spread and participation rate commitments. Distributors must be SFC-licensed and capable of processing creation and redemption requests.

Disclosure

Comprehensive disclosure is required in offering documents and online interfaces, covering the risks specific to 24/7 secondary trading, including liquidity risk, price deviation risk, price fragmentation across trading channels, and market maker reliance. Investors must confirm they understand these risks before being onboarded for secondary trading. Firms should note that the cumulative disclosure burden is considerable. Requirements including real-time NAV dissemination and dedicated online trading interfaces represent a meaningful system investment that should be factored into planning at an early stage.

The framework also permits the use of regulated stablecoins, licensed under Hong Kong's Stablecoins Ordinance, and tokenised deposits to facilitate round-the-clock settlement, further integrating tokenised funds within Hong Kong’s broader Web3 ecosystem.

ASPIRe in Practice

The timing and content of these circulars reflect the SFC’s broader regulatory direction concerning digital assets. As covered in our article on Hong Kong's SFC Sets a Measured Path for Virtual Asset Trading, the ASPIRe roadmap outlines the SFC’s structured plan for developing Hong Kong's virtual asset market across five pillars: Access, Safeguards, Products, Infrastructure, and Relationships. It is defined by disciplined execution, not constant reinvention. These circulars are a direct expression of that principle: progress measured by delivery, not announcements.

The SFC’s own data underscores the momentum. As of March 2026, 13 tokenised products were offered to the public in Hong Kong, with assets under management (AUM) of tokenised classes increasing approximately sevenfold to HK$10.7 billion over the prior year. The secondary trading framework exists to support the next phase of that growth in a regulated, investor-protected way, consistent with the SFC’s established "same business, same risks, same rules" approach to virtual assets, as outlined in our overview of Hong Kong's Virtual Asset Licensing Regime in 2026.

What Compliance Teams Should Do Now

Compliance leaders at asset management firms, banks, insurers, VATPs, and other intermediaries and financial services firms operating in Hong Kong should review both circulars and assess their firm’s position. Firms with existing tokenised funds should act on the extended prior consultation obligations as a priority. Those exploring tokenisation for the first time should factor in regulatory engagement lead times (and the technology and operational costs of meeting disclosure requirements) into their planning from the outset.

Where firms are managing employee trading in digital assets, the compliance obligation extends across employee conduct. As Hong Kong's tokenised fund market expands, so does the potential for employee conflicts of interest occurring.

For compliance teams seeking a software solution to manage tokenised fund compliance, MCO’s Digital Asset and Crypto Trading Compliance solution provides structured oversight of employee personal trading activity in digital assets. Capabilities include pre-clearance workflows, wallet recognition, on-chain activity capture, and audit-ready reporting, giving compliance teams the visibility and evidence trail that regulators expect as firms expand into tokenised fund activities.

MCO’s broader Know Your Employee Compliance Suite also provides firms with a fully integrated solution to monitor, identify and remedy conflicts of interest and code of conduct issues to keep pace with a changing regulatory environment. For compliance teams, the outcome is less time spent on manual processes and more time strategically managing risk.

Are you ready to help your firm meet evolving regulatory expectations? See the MCO (MyComplianceOffice) complete compliance suite in action now.

Also, see our in-depth crypto regulation compliance article which includes the latest updates across Singapore, Japan, the United States, United Kingdom, and more.