On 27 May 2026, the Securities and Futures Commission (SFC) updated the Circular on SFC-authorised funds with exposure to virtual assets. The updated Circular supersedes the version of 7 April 2025 and introduces specific provisions for Relevant Stablecoins, defined as fiat-referenced stablecoins issued under a licence granted under the Stablecoins Ordinance, and for tokenised deposits. Both instruments now receive treatment distinct from other virtual assets under the SFC's fund authorization requirements.
Under the updated Circular, SFC-authorised funds' exposure to Relevant Stablecoins and tokenised deposits does not trigger the standard virtual asset fund authorization requirements that apply to other virtual assets. Under FAQ 20G of the SFC's FAQs on the Code on Unit Trusts and Mutual Funds, prior consultation with the SFC is required for funds intending to have exposure to these instruments that wish to seek SFC authorisation, and for existing SFC-authorised funds that plan to obtain such exposure; the holdings share the same investment restrictions as cash deposits; and management companies may be subject to additional terms and conditions imposed by the SFC's Intermediaries Division, where applicable.
Fund managers holding SFC-authorised mandates that incorporate stablecoin or tokenised deposit positions must review their custody arrangements and pre-acquisition consultation processes against the updated Circular and FAQ 20G. Trustees and custodians of SFC-authorised funds may only delegate custody of Relevant Stablecoins and tokenised deposits to three categories of entity: an SFC-licensed Virtual Asset Trading Platform, an authorised institution meeting Hong Kong Monetary Authority standards, or another entity the SFC finds acceptable. Fund administrators and prime brokers serving SFC-licensed managers should confirm counterparty eligibility under these revised custody standards before settling trades.
The updated Circular does not address stablecoins issued by entities not licensed under the Stablecoins Ordinance. Those instruments remain subject to the standard VA fund authorization regime. Questions remain about how the SFC will treat fund exposure to foreign-issued stablecoins that do not qualify as Relevant Stablecoins under Hong Kong law.
Licentium advises fund managers, virtual asset service providers, and authorised institutions on regulatory compliance in Hong Kong, including SFC fund authorization and stablecoin classification issues. We maintain a partner network covering Hong Kong fund law, HKMA-regulated entity structuring, and virtual asset custody. To discuss how this circular affects your fund's investment mandate or custody arrangements, contact us. Work we undertake includes SFC fund authorization advice, virtual asset custody structuring, stablecoin regulatory classification analysis, and SFC-licensed manager compliance reviews.
Source: Securities and Futures Commission, Circular on SFC-authorised funds with exposure to virtual assets (updated 27 May 2026); Securities and Futures Commission, FAQs on the Code on Unit Trusts and Mutual Funds, question 20G