HONG KONG SAR, CHINA Law and Practice Contributed by: Pang Lee, Joyce Wang, Mark Liang and Francis Li, Cooley
2.5 Market Abuse Hong Kong maintains a robust statutory framework countering market abuse and insider trading under the SFO, which the SFC actively enforces. Prohibited behaviours include insider dealing, false trading, price rigging, stock market manipulation and the disclosure of false or misleading information inducing transac- tions. The market abuse framework applied to crypto-assets shares foundational principles with traditional securi- ties but differs materially in its practical application and technical surveillance requirements, as outlined in the SFC’s 11 February 2026 paper of policy state- ment regarding Perps (“A high-level framework for vir- tual asset perpetual contracts offering by virtual asset trading platforms”). In traditional equities, insider information typically revolves around unreleased corporate earnings, executive changes, or pending mergers and acqui- sitions. Insider information in the crypto market, however, encompasses undisclosed knowledge of impending smart contract upgrades, hard fork events, undetected protocol vulnerabilities or co-ordinated shifts in decentralised liquidity pool architectures. Furthermore, manipulation tactics in the digital asset space are highly specialised. The SFC mandates that licensed VATPs implement bespoke market surveil- lance systems designed to detect patterns unique to crypto derivatives, such as material deviations between an asset’s underlying index price and its mark price, abnormal funding rate manipulations, wash trading across fragmented blockchain networks and artificially triggered clusters of forced liquidations. 2.6 Non-Compliance Firms that fail to comply with regulatory requirements face severe enforcement actions, as Hong Kong regu- lators enforce the rules with aggressive zero-tolerance policies towards fraud and unauthorised operations. Providing VA services without the requisite SFC or HKMA licences constitutes a criminal offence. Penal- ties include fines of up to HKD5 million and imprison- ment for seven years, with continuing offences sub- ject to recurring daily fines. Fraudulently or recklessly inducing others to invest in VAs carries maximum pen-
the fund is authorised for retail or restricted to profes- sional investors. 2.4 Token Issuance Hong Kong accommodates a highly viable, institution- al-grade crypto-asset issuance and token generation event industry, though it firmly rejects the unregulated ICO models prevalent in earlier market cycles. Launching a crypto-asset or admitting one for trading on a licensed VATP requires navigating stringent token admission criteria established by the SFC June 2023 Guidelines for Virtual Asset Trading Platform Opera- tors, which mandate the creation of an independent token admission and review committee comprising senior management members principally responsible for the platform’s key business lines, compliance, risk management and information technology functions, to assess the smart contract security and regulatory status of the token. To foster market dynamism, the SFC issued the “Cir- cular on expansion of products and services of vir- tual asset trading platforms” on 3 November 2025, which removed historical friction points. The previous mandate requiring a 12-month track record for any VA before it could be offered to investors has been formally removed for VAs offered exclusively to Pro- fessional Investors. Furthermore, this track record requirement is entirely waived for an FRS issued by entities licensed by the HKMA under the Stablecoins Ordinance, allowing for immediate retail distribution upon launch. When selling a crypto-asset into Hong Kong, disclo- sure requirements vary based on the classification of such crypto-asset. If the token constitutes a “secu- rity”, traditional prospectus and whitepaper disclosure requirements under the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the SFO apply in full force, absent a valid private placement exemption. For non-security tokens listed on VATPs, operators must ensure that comprehensive risk dis- closure statements are prominently featured, detailing the project’s background, smart contract audit results, underlying tokenomics and the specific volatility and liquidity risks associated with the asset.
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