SFC sets expected standards for VATPs and licensed corporations on Relevant Stablecoin services
VATPs and licensed corporations must adopt revised licensing conditions and update disclosures, client classification, and SFC-notification workflows before conducting Relevant Stablecoin activities
Change
On 27 May 2026, the SFC issued a circular setting expected standards for licensed virtual asset trading platforms (VATPs) and licensed corporations conducting activities in Relevant Stablecoins — stablecoins that qualify as 'specified stablecoins' under the Stablecoins Ordinance (Cap. 656) and are issued by an HKMA-licensed issuer. The circular relaxes certain virtual-asset requirements for Relevant Stablecoins, imposes new disclosure and advance-notification obligations, and applies revised licensing conditions to VATPs and licensed corporations.
Why it matters
The circular clarifies that, because Relevant Stablecoins are under HKMA oversight (reserve backing and redemption), several VA requirements need not apply: liquidity and index requirements, VA-knowledge assessment for Relevant Stablecoin-only clients, and inclusion of Relevant Stablecoin holdings in client exposure limits. In their place sit new affirmative obligations: clients must receive material disclosure on the stablecoin's stabilisation mechanism and redemption arrangements; suitability requirements continue to apply on any solicitation or recommendation; and VATPs and licensed corporations must give the SFC advance written notice before admitting, suspending or removing any Relevant Stablecoin (replacing the prior-approval step). For licensed corporations, the circular opens new structural arrangements — partnering directly with HKMA-licensed stablecoin issuers, dealing through omnibus accounts with professional-investor-only (PIO) VATPs to serve retail clients (paragraph 20(a)(iii) of the Joint Circular is removed), and using the licensed issuer's segregated custody accounts. Revised licensing conditions apply to VATPs (Appendix 1) and to licensed corporations (Appendices A1/A2, tracked changes B1/B2). The relief is bounded: it applies only to Relevant Stablecoins, not to other stablecoins, so correct product and client classification is the precondition for relying on any of the relaxations. A companion HKMA circular issued the same day covers the licensed-issuer/banking channel.
Implications
- — VATPs and licensed corporations must adopt the revised licensing conditions (Appendix 1 for VATPs; Appendices A1/A2 for licensed corporations) and review and update their internal policies, procedures, and disclosures before conducting Relevant Stablecoin activities — operating under the prior conditions or without the required disclosures is non-compliant.
- — Compliance teams must implement the Relevant Stablecoin disclosure requirement — clients must receive material information on the stablecoin's stabilisation mechanism and redemption arrangements; omitting this is a disclosure breach even though liquidity, index, and exposure-limit requirements are relaxed for these tokens.
- — VATPs and licensed corporations must establish an advance written-notification process to the SFC for any plan to admit, suspend, or remove a Relevant Stablecoin for client trading — prior SFC approval is no longer required, but the advance-notification obligation is mandatory and replaces it.
- — Licensed corporations and VATPs must correctly classify 'Relevant Stablecoin-only clients' before applying the relaxed VA-knowledge assessment and exposure-limit treatment — applying the relaxation to a client who also trades other virtual assets, and skipping the knowledge assessment, is an onboarding and suitability breach; the assessment must still be performed for any non-Relevant-Stablecoin-only client regardless of what they ultimately trade.
- — Licensed corporations may restructure dealing arrangements — partnering directly with HKMA-licensed stablecoin issuers, using omnibus accounts with professional-investor-only (PIO) VATPs to serve retail clients, and holding clients' Relevant Stablecoins in the licensed issuer's segregated custody accounts — but must ensure retail clients only trade tokens that have passed the VATP's retail token-admission and review process and must maintain client-asset segregation (paragraph 20(a)(iii) of the Joint Circular removed).
- — Licensed corporations whose licences do not carry the relevant virtual-asset licensing conditions must modify those conditions through existing SFC licensing procedures before commencing any Relevant Stablecoin activity — commencing without the condition modification is unlicensed activity.
Who is affected
- — Licensed virtual asset trading platforms (VATPs) — Type 1 and Type 7, or VA-service-licensed under the AMLO
- — Licensed corporations providing virtual asset dealing and advisory services
- — Licensed corporations managing portfolios that invest in virtual assets
- — Compliance, onboarding, and suitability teams at VATPs and licensed corporations
- — HKMA-licensed stablecoin issuers offering custody and partnering arrangements
- — Professional-investor-only (PIO) VATPs serving retail clients indirectly through licensed corporations
What to watch
- — Further HKMA stablecoin issuer licences beyond the two granted on 10 April 2026 — each expands the universe of Relevant Stablecoins eligible for the relaxed treatment
- — The companion HKMA circular (27 May 2026) on Relevant Stablecoin activities by licensed stablecoin issuers — aligned obligations for the registered-institution/banking channel
- — SFC processing of licensing-condition modifications for licensed corporations entering Relevant Stablecoin activity
- — Any SFC guidance on distinguishing Relevant Stablecoins from non-Relevant stablecoins in practice, since the circular's relief is expressly bounded to the former