Hong Kong launches secondary market for tokenized securities: fundamentally reshaping the regulatory framework

Hong Kong financial regulators are preparing a major initiative—opening trading permissions for tokenized securities to retail investors. The core idea of this policy change is to integrate technological innovation with the traditional securities regulatory framework. The Securities and Futures Commission (SFC) advocates adopting a “same business, same risk, same rules” regulatory principle.

According to industry sources, SFC Deputy Director Lo Hoi-sze recently stated that regulators are beginning to study multi-dimensional issues related to the trading of tokenized securities, including applicable standards, technological risk prevention, and supporting regulatory guidelines. This indicates that Hong Kong is not far from fully opening this innovative trading method.

The Nature of Tokenized Securities: Traditional Securities Wrapped in Technology

The SFC’s position is quite clear: tokenized securities fundamentally remain securities, simply upgraded with blockchain and other technological means. This argument breaks the market’s misconception that “tokens = special assets,” laying the foundation for subsequent policy development. Based on this understanding, regulators have decided to apply the existing traditional securities regulatory system directly to tokenized products, rather than designing a complex dual-track system. This approach protects investor rights while avoiding overregulation that could stifle innovation.

From Primary to Secondary Markets: Phased Expansion of Trading Permissions

Currently, retail investors in Hong Kong can only participate in the subscription and redemption of tokenized funds at the primary issuance stage but cannot trade them on platforms. The SFC is planning to authorize approved virtual asset trading platforms (VATPs) to offer secondary trading services for tokenized securities. This shift will significantly enhance market liquidity and provide investors with more flexible asset allocation options.

Meanwhile, the SFC has shown strong interest in local tokenized money market funds and plans to open VATP trading services in this area. These funds can offer stable returns while leveraging blockchain technology’s efficient transfer capabilities.

Regulatory Consultation and Policy Preparation: Industry Engagement Underway

To ensure the feasibility and market acceptance of the policies, the SFC has initiated preliminary consultations with industry participants, engaging in in-depth discussions on key issues such as risk management, technical standards, and investor protection related to tokenized securities trading. Circular letters are also being actively prepared.

These initiatives demonstrate that Hong Kong is fundamentally changing its perception of digital asset trading—no longer viewing it as a high-risk speculative field, but as a natural extension of traditional financial markets. This move not only aligns with the global trend of asset tokenization but also highlights Hong Kong’s forward-looking policy stance as an international financial center.