Final · Applies to Fund managers, VASPs, Brokers, Retail
The SFC set requirements for trading tokenised SFC-authorised investment products on licensed virtual asset trading platforms, including by retail investors. It revised its 2023 tokenisation circular at the same time. The rules are written mainly for open-ended funds and cover fair pricing, market making, disclosure and the link between primary dealing and on-platform trading.
Why it matters: Tokenised funds in Hong Kong now have a trading venue, which is the missing piece that kept them a subscription-and-redemption product.
For Ethereum: Tokenised funds may still only use a public permissionless chain with extra controls, such as a permissioned token.
The revised tokenisation circular now says secondary trading of tokenised SFC-authorised products on a licensed platform is allowed (para 6). The product provider stays responsible for the tokenisation arrangement and ownership records even if it outsources them (para 10). It may not use public permissionless networks “without additional and proper controls”, with a permissioned token given as the example (para 13).
Retail investors may trade through on-screen, auto-matched trading on licensed platforms, under the existing platform rules (paras 8 to 9), and trades must be fully pre-funded (para 10).
Platforms must warn investors when the trade price deviates from the fund’s indicative net asset value beyond a set threshold, and remind them they can subscribe or redeem at net asset value instead (para 12).
Product providers should arrange at least one market maker, with three months’ notice before it leaves, and link the primary and secondary markets so tokens can move between them (para 15).
Offering documents must disclose thin trading, weekend price gaps and price differences across venues (para 19).
Implications
Tokenised money market funds and similar products have been authorised in Hong Kong since the 2023 circulars, but holders could only subscribe and redeem with the manager. Trading on a platform gives them round-the-clock transferability, which is the use case for tokenised funds as collateral or cash management.
The rules copy the exchange-traded fund model: market makers, indicative net asset value, and arbitrage between the primary and secondary market. That is a proven structure. It also means the product only works if a market maker commits, and the SFC puts the burden of monitoring market makers on the platform.
For Ethereum
Paragraph 13 of the tokenisation circular is unchanged in substance: public permissionless chains are allowed only with extra controls. In practice that means whitelisted, permissioned tokens on chains like Ethereum rather than freely transferable ones. The new trading channel is the licensed platform’s order book, not an on-chain venue, so secondary liquidity stays off-chain even when the token lives on Ethereum.
Elsewhere in Asia
India’s Demat 2.0 pilot takes the opposite route: a ledger owned by the depositories, with retail access deferred to a later phase.
What to watch
The first tokenised fund listed for on-platform trading, which platform lists it, and whether a market maker other than the manager’s affiliate signs up.