The Hong Kong Securities and Futures Fee (SFC) has issued new, instantly efficient steerage on cryptocurrency custody requirements, introducing sweeping safety necessities and a ban on good contracts in chilly pockets implementations.
In a round launched Friday, the regulator outlined prescriptive controls for licensed custodians of digital property. The measures embrace requiring a licensed {hardware} safety module, permitting withdrawals solely to whitelisted addresses, and sustaining a 24/7 safety operations middle to observe programs, networks, wallets and infrastructure.
The atmosphere the place non-public keys are used to signal transactions also needs to be air-gapped and bodily secured, with keys being generated and stored offline. The regulator recommends “strict multi-factor bodily entry management.”
“Going ahead, these requirements can even represent core expectations for the suppliers of Digital Asset Custodian Companies, and assist to foster a constant framework for digital asset custody throughout the business,” the round reads.
Associated: Animoca and Customary Chartered kind stablecoin enterprise in Hong Kong
No good contract for chilly wallets
One of the hanging adjustments is a ban on good contracts in chilly wallets. The round states that “chilly pockets implementations shouldn’t embrace good contracts on public blockchains to minimise potential on-line assault vectors related to on-chain good contracts.”
Good contracts are extensively utilized by institutional custodians for each cold and warm wallets. BitGo, for instance, makes use of Ethereum good contracts which are optimized for each cold and warm wallets and particulars its smart-contract multisig mannequin for account-based chains.
Protected, beforehand referred to as Gnosis Protected, is one other good contract-based custody answer, with a Messari report stating it held $72 billion in over 25 deployed good accounts as of the third quarter of 2024.
US-based publicly traded crypto alternate Coinbase known as Protected “the main supplier” of multisig providers in March 2024, underscoring the potential business pushback to Hong Kong’s transfer.
Associated: Hong Kong stablecoin shares slide as new guidelines take impact, consultants see wholesome reset
Hong Kong builds a crypto hotspot
Hong Kong is rising as Asia’s crypto hotspot by transferring shortly on guidelines and market entry. Regulators accepted and launched spot Bitcoin and Ether ETFs in April 2024, giving establishments a compliant option to acquire publicity, and laid out the ASPIRe roadmap in February to widen entry whereas tightening safeguards throughout custody, merchandise and market construction.
On the identical time, the particular administrative area of China retains increasing its licensed alternate roster and locking in a full stablecoin regime. Extra digital asset buying and selling platform licenses had been added in late 2024, and Hong Kong’s stablecoin legislation turned efficient on Aug. 1, with a forthcoming public registry of licensed issuers.
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