Background
Driven by growing industry enthusiasm for RWA tokenisation, on 20 April 2026, the Securities and Futures Commission of Hong Kong (the “SFC”) issued the Circular on Tokenisation of SFC-authorised Investment Products and the Circular on Secondary Trading of Tokenised SFC-authorised Investment Products (collectively, the “2026 Circulars”). The 2026 Circulars explicitly permit secondary trading of “tokenised SFC-authorised investment products” through SFC-licensed virtual asset trading platform operators (referred to below as “SFC-licensed VATPs”).
The 2026 Circulars not only replaced the SFC’s previous Circular on Tokenisation of SFC-authorised Investment Products issued on 2 November 2023 but also set out clear regulatory requirements and guidance on the tokenised products themselves, the offering documents, primary dealing, and secondary trading.
Previously, the SFC only permitted primary dealing of tokenised products (i.e., direct subscription and redemption by investors). The changes outlined in the 2026 Circulars significantly enhance the liquidity and market scalability of tokenised products. It demonstrates the SFC’s regulatory approach of keeping pace with the evolution of the Web3 ecosystem and market demand, to provide investors with more efficient, lower-cost investment channels that support 24/7 trading.
In addition to the changes outlined in the 2026 Circulars, institutions engaging in activities related to tokenised products must also comply with the relevant provisions of the SFC’s Circular on Intermediaries Engaging in Tokenised Securities-related Activities issued on 2 November 2023 (the “Tokenised Securities Circular”).
In the sections below, we provide a detailed interpretation of the respective requirements under the 2026 Circulars and the Tokenised Securities Circular that must be observed by the various parties involved in tokenised product activities, including product providers, primary market distributors, SFC-licensed VATPs, and connecting brokers, together with a compliance checklist.
I. Definition of Tokenised SFC-authorised Investment Products (“Tokenised Products”)
SFC-authorised investment products refer to investment products formally authorised by the SFC for public offering in Hong Kong under Part IV of the Securities and Futures Ordinance, such as public funds, collective investment schemes (CIS), and exchange-traded funds (ETFs).
Tokenisation of SFC-authorised investment products means converting these products into blockchain-based digital tokens that represent investors’ ownership interests in the underlying SFC-authorised investment products. Taking a tokenised fund as an example, investors hold ownership of fund units/shares in the form of tokens and subscribe for, redeem, or trade the fund units/shares by subscribing for, redeeming, or trading the tokens.
It should be particularly noted that, in relation to secondary trading, the SFC has now opened secondary trading of tokenised open-ended public funds (i.e., funds open to retail investors) on SFC-licensed VATPs. The SFC has indicated that it may expand secondary trading to more types of Tokenised Products in the future.
II. Product-level Requirements for Tokenised Products
Underlying SFC-authorised Investment Products
Traditional investment product requirements — Under the “see-through” regulatory approach, product providers must ensure that the underlying traditional investment products comply with the relevant laws, regulations, and product codes applicable to traditional investment products, including eligibility of product providers, product structure, investment and operational requirements, disclosure, and ongoing compliance obligations.
No bearer products — The SFC does not permit product providers to issue Tokenised Products in bearer form. Therefore, investors in both the primary and secondary markets are required to undergo appropriate customer due diligence, anti-money laundering and counter-terrorist financing (AML/CTF) procedures.
Tokenisation Arrangement
Product providers ultimately responsible — Product providers must, at all times, remain ultimately responsible for the management and operational soundness of the tokenisation arrangement adopted and the keeping of ownership records, regardless of any outsourcing of the tokenisation arrangement to third parties.
Business continuity — Product providers must properly maintain records of token holders’ ownership interests in the product and ensure that the tokenisation arrangement is operationally compatible with the service providers involved. They must implement appropriate measures to manage cybersecurity risks, data privacy, system outages and recovery, and maintain a comprehensive and robust business continuity plan.
Choice of distributed ledger technology — The SFC requires that product providers must not use public-permissionless blockchain networks without additional and proper controls (for example, by imposing additional control through the use of a permissioned token).
Soundness — In addition to the above, the SFC requires product providers, upon request, to demonstrate the soundness of the tokenisation arrangement and the integrity of the smart contracts, and to provide third-party audit (such as smart contract audit) and legal opinion.
Disclosure Requirements (applicable to both primary and secondary market products)
Settlement mechanism — Product providers should clearly set out in the offering documents the overall tokenisation arrangement, in particular whether off-chain or on-chain settlement is final, and whether such settlement is irreversible.
Nature of token ownership — The offering documents must also clearly explain the nature of ownership represented by the tokens (e.g., legal and beneficial title of the tokens, and ownership of / interests in the underlying product).
Risks of the tokenisation arrangement — The offering documents must fully disclose the material risks associated with the tokenisation arrangement, including but not limited to cybersecurity risks, system outages or failures, the possibility of undiscovered technical flaws, the evolving regulatory landscape, and potential challenges in the application of existing laws.
Additional Disclosure Requirements (applicable to products which can be traded in the secondary market)
In addition to the above, if the relevant product supports secondary trading, product providers must also disclose in the offering documents:
- Secondary trading risks — for example, liquidity risk (potentially very thin trading due to limited participants in the secondary market) and price deviation risk (large premium/discount to NAV, particularly outside normal Hong Kong financial market hours and during weekends), price fragmentation risk (different trading prices across different trading channels), and market maker reliance risk;
- Secondary trading channels — operational flow, settlement process, settlement time, pre-funding requirement, differences between the secondary and primary markets, and whether the Tokenised Products can be traded interchangeably across trading channels;
- Market making arrangements — including any incentive schemes provided by the product provider and/or SFC-licensed VATPs to market makers, and the indicative range of fees applicable to secondary trading;
- Circumstances under which secondary trading of the Tokenised Products may be suspended; and
- Arrangements of market makers — disclosure of current market makers for the Tokenised Products, and of any potential conflicts of interest if the product provider or its affiliates act as market makers.
Staff Competence
At least one competent individual — Product providers must have at least one competent staff member with relevant experience and expertise to operate and/or supervise the tokenisation arrangement and to appropriately manage the new risks relating to ownership and technology.
Consultation with the SFC
Product providers must engage in prior consultation with the SFC before launching new investment products with tokenisation features, introducing tokenisation arrangements for existing SFC-authorised investment products, or making any material changes to existing tokenisation arrangements, and obtain approval from the SFC (if required). The SFC will assess each application on a case-by-case basis. Given the rapidly evolving nature of the tokenisation market, the SFC may provide further guidance or impose additional requirements where appropriate.
Product providers must also promptly notify the SFC of any untoward circumstances relating to the Tokenised Products under their management that may adversely affect operations, secondary trading, liquidity or the rights of investors, and provide an assessment of potential impact, remedial actions, and an appropriate contingency plan.
III. Requirements for Primary Dealing of Tokenised Products
Type 1 License and Applicable Requirements
Distributors participating in primary dealing of Tokenised Products (including product providers that distribute their own products) must be SFC-licensed corporations or registered institutions and must hold a Type 1 license with permission to distribute Tokenised Products. Distributors must comply with the applicable requirements under existing rules, codes, and guidelines (e.g., client onboarding and suitability assessment).
Staff Competence
Distributors must have the necessary personnel and professional knowledge to understand the nature of tokenised business, particularly the new risks relating to ownership and technology, and implemention of appropriate risk management measures.
Product Due Diligence and Disclosure Obligations
Distributors must perform product due diligence (including on the underlying product and tokenisation technology aspects) and provide clients with clear and comprehensible disclosure of material information, including specific details of the tokenisation arrangement.
Consultation with the SFC
Type 1 license holders intending to engage in any activities involving Tokenised Products (such as distribution) should notify their SFC case officers in advance of their business plans and discuss the matter with them. They should also provide any information the SFC may from time to time require in relation to such services.
IV. Requirements for Secondary Trading of Tokenised Products
SFC-licensed VATPs may only provide secondary trading of Tokenised Products through on-screen auto-matching trading and must comply with the existing trading operation rules, and risk control measures applicable to on-platform trading of virtual assets under the Guidelines for Virtual Asset Trading Platform Operators (“VATP Guidelines”).
Fair Pricing
Price deviation risk — SFC-licensed VATPs must implement effective risk management and supervisory controls, including issuing a Price Deviation Alert when the price to be executed deviates significantly from the product’s real-time or near real-time indicative net asset value (iNAV) per unit (based on a reasonably set threshold). They must also inform investors that they may choose to subscribe or redeem at NAV in the primary market instead of secondary trading.
Prevention of market manipulation — SFC-licensed VATPs should implement automated pre-trade and regular post-trade monitoring to prevent excessive price fluctuations, market manipulation, and to identify suspicious activities.
Responsibilities of connecting brokers — Where connecting brokers (i.e., brokers that facilitate trading of Tokenised Products for their clients on SFC-licensed VATPs) are involved, they must ensure that the Price Deviation Alert is displayed and inform investors that they may choose to subscribe or redeem at NAV in the primary market.
Liquidity Provision
At the product provider level:
- Product providers must use their best endeavours to arrange that each Tokenised Product has at least one market maker and that at least one market maker will give not less than three months’ notice prior to terminating the market making arrangement;
- Product providers must closely monitor secondary trading activities and liquidity, maintain close dialogue with market makers, establish appropriate business contingency plans, and take necessary remedial actions in the best interests of investors; and
- Product providers should put in place arrangements with SFC-licensed VATPs to facilitate the transfer of Tokenised Products across primary and secondary markets.
At the SFC-licensed VATP level:
- SFC-licensed VATPs must, with reference to the terms agreed with the market makers, conduct due diligence and regular monitoring of the performance of all market makers admitted to their platforms and be reasonably satisfied that such market makers remain competent, properly resourced, and capable of performing their obligations as market makers;
- SFC-licensed VATPs must ensure that all market makers admitted to their platforms maintain appropriate commitment to bid-ask spreads, quote size, minimum time for which a market making order is maintained, and participation rates;
- When market makers fall short of their obligations, SFC-licensed VATPs must liaise with them proactively and require that those market makers rectify the situation; and
- SFC-licensed VATPs must specify in their arrangements with market makers (i) the eligibility criteria and obligations applicable to market making for Tokenised Products, and (ii) the arrangements in the event that a market maker ceases to provide market making services to a particular Tokenised Product.
Disclosure Requirements
In addition to the product provider’s disclosure obligations, SFC-licensed VATPs and connecting brokers must maintain or provide access to dedicated online interfaces (e.g., website or app) to disclose:
- Detailed information on the secondary trading arrangement of the relevant Tokenised Products, including trading channels, market making arrangements (including any incentive schemes), eligibility criteria of market makers, fees applicable to secondary trading, and price quotation/bid-ask spread;
- Real-time or near real-time indicative NAV per unit (typically updated at least every 15 seconds during trading hours) and the latest NAV per unit, with the data source and update frequency; and
- The associated risks specific to clients intending to participate in secondary trading (liquidity risk, price deviation risk, price fragmentation risk, and market maker reliance risk). SFC-licensed VATPs and connecting brokers must obtain client confirmation that they understand these risks before onboarding them for secondary trading of Tokenised Products.
Notification to the SFC in respect of the Tokenised Products
- General Notification — Product providers should give the SFC early alerts of any untoward circumstances relating to the Tokenised Products under their management, including any issues that may adversely affect operations, secondary trading, or liquidity (including receipt of resignation notices from the last market maker).
- Major Event Notification — If dealing in the Tokenised Products on the primary or secondary market ceases or is suspended, or if market making activities cease, are disrupted, or are suspended, product providers should immediately notify the SFC and investors as soon as practicable. Such notification should include an assessment of the impact on the Tokenised Products, remedial actions, and an appropriate contingency plan.
Consultation with the SFC
Product providers must consult the SFC in advance regarding any subsequent proposed material changes to secondary trading arrangements previously approved by the SFC (e.g., trading mechanisms, Price Deviation Alerts, market making arrangements, and addition of trading channels).
Intermediaries (including SFC-licensed VATPs and the connecting brokers intending to engage in over-the-counter secondary trading of Tokenised Products) should notify and discuss their proposals with their SFC case officers prior to engaging in secondary trading for the first time. If material changes are subsequently made to the arrangement communicated, they should also notify their SFC case officers (and the HKMA where applicable).
V. Compliance Guidelines for Issuing Tokenised Products
Based on the 2026 Circulars and the Tokenised Securities Circular, we summarise the key compliance responsibilities of the various parties involved in Tokenised Product projects as follows:
Party / Role
Key Compliance Focus
Product providers (including fund managers holding a Type 9 license)
- Ensure overall compliance of the underlying product and tokenisation arrangement and prohibit issuance of bearer products
- Bear ultimate responsibility for the tokenisation arrangement (including soundness, ownership records and cybersecurity)
- Provide full disclosure in offering documents as required by the SFC, including risk disclosures (especially settlement finality, nature of ownership, technology risks, and secondary market risks: liquidity risk, price deviation risk, price fragmentation risk and market maker reliance risk)
- Arrange market makers and monitor secondary market liquidity
- Appoint at least one competent individual to supervise tokenisation matters
- Consult with the SFC in advance and obtain necessary approvals before launching new products or making material changes
- Promptly notify the SFC of any untoward circumstances that may affect product operations, secondary trading, or liquidity (including resignation of the last market maker)
- In the event of suspension or cessation of trading or market making activities, notify the SFC and investors as soon as practicable with an impact assessment, remedial actions, and contingency plan
Primary Market Distributors (including product providers distributing their own products and Type 1 licensed intermediaries)
- Must be SFC-licensed corporations or registered institutions
- Must hold a Type 1 license and obtain permission to distribute Tokenised Products
- Conduct due diligence on the product and tokenisation technology
- Perform client suitability assessment and risk disclosure
- Understand new risks arising from tokenisation and implement appropriate management measures
- Notify and discuss business plans with SFC case officers prior to engaging in relevant activities
SFC-licensed VATPs (secondary trading)
- May only provide secondary trading through on-screen auto-matching and must comply with the VATP Guidelines
- Implement Price Deviation Alert and trading monitoring to prevent excessive price fluctuations and market manipulation
- Conduct due diligence and ongoing monitoring of market makers
- Clearly disclose trading arrangements, fees, risks, market maker arrangements, and lists of market makers
- Obtain client confirmation that they understand the relevant risks prior to onboarding
- Inform investors of the option to subscribe/redeem at NAV in the primary market
- Notify and discuss proposals with SFC case officers before first engaging in secondary trading business, and before making material changes
Connecting brokers (secondary trading, e.g. Type 1 licensed intermediaries)
- Display Price Deviation Alert to clients
- Remind clients of the option to subscribe/redeem at NAV in the primary market
- Ensure relevant risk disclosure and assist clients in participating in secondary trading
- Obtain client confirmation that they understand the relevant risks prior to onboarding
- Notify and discuss proposals with SFC case officers before first engaging in secondary trading, and before making material changes
Conclusion
The issuance of the 2026 Circulars by the SFC represents not only an optimisation of the regulatory framework but also a key step in connecting traditional finance with Hong Kong’s Web3 future. As Hong Kong accelerates its development as an international Web3 hub, Tokenised Products are set to become popular in the market in 2026. Product providers, distributors, SFC-licensed VATPs, and connecting brokers each have their respective roles and must work together to maintain market order. Looking ahead, this regulatory breakthrough will further consolidate Hong Kong’s leading position as an international virtual asset hub, promote deep integration between Tokenised Products and traditional finance, and usher in a new chapter in the digital asset era.
JunHe Virtual Assets and Web3 Team
We continue to closely monitor regulatory developments in blockchain, virtual assets, and RWA around the world and have extensive knowledge and experience in the relevant legal fields. We have provided legal advice to numerous institutional clients and Web3 enterprises on virtual asset and RWA-related businesses in Hong Kong and other jurisdictions, with more than ten successful cases.
We recommend that project parties planning to issue RWA tokenised products focus on the compliance of their project structure and make early preparations. If you have any questions regarding compliance matters for RWA tokenisation in Hong Kong, please feel free to contact us at any time.
For further information, please contact:
QIAO, Zheyuan (Jacqueline), Partner, JunHe
zyqiao@junhe.com
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(18) For the latest regulatory developments on stablecoins in the United States, Singapore and Hong Kong, please refer to our earlier article titled「浅谈全球稳定币监管（二）：美国、新加坡、香港稳定币立法趋势比较」.
(19) For details regarding the Consultation Paper on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the Securities and Futures Commission issued by the SFC on 20 February 2023, please refer to our earlier article titled「香港证监会就虚拟资产交易平台牌照（1、7号牌照及VASP牌照）申请要求展开咨询」.
(20) For details regarding the Policy Statement on Development of Virtual Assets in Hong Kong, issued by the Hong Kong Special Administrative Region Government on 31 October 2022, please refer to our earlier article titled「确保Web3创新发生在香港 – 香港就推动建设虚拟资产中心发布政策宣言」.
(21) For the SFC’s regulatory regime for VASPs, please refer to our earlier article titled「香港将针对虚拟资产服务提供商建立发牌制度」.
(22) For an interpretation on the United States crypto assets act, please refer to our earlier article titled「美国Lummis-Gillibrand 加密资产法案要点解析」.
(23) For an overview of the regulatory landscape for stablecoins across major countries and regions worldwide, please refer to our earlier article titled「浅谈全球稳定币监管」.
