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Matthias Knab, Opalesque for New Managers: Hong Kong's Securities and Futures Commission (SFC) has updated its guidelines for funds investing in virtual assets, offering hedge funds clearer - but still restrictive - pathways to crypto exposure. The revised circular, effective immediately, replaces the December 2023 rules and reflects the regulator's attempt to balance innovation with investor protection.
Key Changes for Hedge Funds
1. Expanded Eligibility
- Funds can now invest >10% of NAV in crypto, but only in tokens tradable on SFC-licensed platforms (e.g., Bitcoin, Ethereum).
- Indirect exposure (e.g., futures, ETFs) is permitted but must meet liquidity and cost-roll requirements.
2. Stricter Manager Requirements
- Track record: Management firms must prove compliance history.
- Expertise: At least one staffer with crypto experience is mandatory.
3. Custody Safeguards
- Assets must be held with SFC-licensed custodians or authorized banks.
- Cold wallet dominance: >90% of holdings, with hot wallets minimized.
- Private keys must be stored in Hong Kong under multi-sig protocols.
4. New Allowances: Staking & Crypto Activities
- Funds may engage in staking and other yield-generating activities via lice...................... To view our full article Click here
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