Hong Kong to allow institutional crypto derivatives

The move signals a possible shift in how digital asset products are treated within the city’s financial system. In essence, the Securities and Futures Commission (SFC) is reportedly preparing to allow access to crypto derivatives trading for professional investors, according to local media reports. This development follows long-standing calls from market participants to regulate and authorise derivatives tied to digital assets.

Derivatives market outpaces spot volumes

While spot trading has dominated retail activity in crypto markets, derivatives represent a significantly larger share of global trading volumes. Data compiled by TokenInsight indicates that derivatives accounted for approximately USD 21 trillion in trading volume during the first quarter of the year, in contrast to USD 4.6 trillion for spot markets. 

Industry stakeholders have pointed to this gap as a reason for regulatory attention. Representatives from Deribit, a major crypto derivatives exchange, previously told the South China Morning Post that the absence of clear rules for these instruments has been a notable regulatory omission in Hong Kong. 

The shift in stance also comes after recent legislative changes. Hong Kong's Legislative Council passed a bill enabling the licencing of stablecoin issuers, a move seen as part of the territory’s effort to establish a more defined regulatory structure for virtual assets. 

The Stablecoin Bill, passed by the Legislative Council, will take effect later in 2025, requiring stablecoin issuers in the region to obtain a licence from the Hong Kong Monetary Authority (HKMA). The law also aims to protect the general public and investors by enabling only licenced firms to advertise such assets. 

Representatives from HKMA mentioned that the legislation established a risk-based, pragmatic, and flexible regulatory regime. Such a regulatory environment would support the sustainable and healthy development of the city’s ecosystem for stablecoins and digital assets.