The Hong Kong Securities and Futures Fee (SFC) issued instantly efficient steerage on cryptocurrency custody requirements, introducing sweeping safety necessities and a ban on sensible contracts in chilly pockets implementations.
In a round released on Friday, the regulator outlined prescriptive controls for licensed custodians of digital property. They embody requiring an authorized {hardware} safety module, permitting withdrawals solely to whitelisted addresses and sustaining a 24/7 safety operations heart to watch techniques, networks, wallets and infrastructure.
The atmosphere the place personal keys are used to signal transactions also needs to be air-gapped and bodily secured, with keys being generated and saved offline. The regulator really useful “strict multi-factor bodily entry management.”
“Going ahead, these requirements will 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 stated.
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No sensible contract for chilly wallets
Probably the most putting modifications is a ban on smart contracts in chilly wallets. The round states that “chilly pockets implementations mustn’t embody sensible contracts on public blockchains to minimise potential on-line assault vectors related to on-chain sensible contracts.”
Sensible contracts are broadly utilized by institutional custodians for each cold and hot wallets. BitGo, for instance, makes use of Ethereum sensible contracts which can be optimized for each cold and hot wallets and beforehand outlined its smart-contract multisig mannequin for account-based chains.
Protected, beforehand referred to as Gnosis Protected, is one other sensible contract-based custody resolution, with a Messari report stating it held $72 billion in over 25 deployed sensible accounts as of the third quarter of 2024.
US-based publicly traded crypto change Coinbase called Protected “the main supplier” of multisig companies in March 2024, underscoring the potential business pushback to Hong Kong’s transfer.
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Hong Kong builds a crypto hotspot
Hong Kong is rising as Asia’s crypto hotspot by transferring rapidly on guidelines and market entry. Regulators authorized and launched spot Bitcoin and Ether ETFs in April 2024, giving establishments a compliant solution to achieve 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 change roster and locking in a full stablecoin regime. Extra virtual asset trading platform licenses were added in late 2024, and Hong Kong’s stablecoin legislation became effective on Aug. 1, with a forthcoming public registry of licensed issuers.
Journal: Hong Kong hoses down stablecoin frenzy, Pokémon on Solana: Asia Express
