The Association Urges the SFC to Optimise the CVAP Examination and Raises Concerns over Operating Costs under New VA Policies

On 3 July 2026, the Hong Kong Securities and Futures Professionals Association (the “Association”) visited the Legislative Council and held a meeting with Mr. Joseph Chan, Under Secretary for Financial Services and the Treasury, along with other secretaries, as well as regulatory representatives from the Securities and Futures Commission (SFC), including Dr. Eric Yip, Executive Director of the Intermediaries Division, Ms. Monica To, Senior Director, and Ms. Elizabeth Wong, Director of Intermediaries & Head of Fintech unit. The two sides engaged in in-depth, candid and constructive exchanges on a range of core issues, including the latest policies on virtual assets (VA), the licensing regime, operating costs, and the industry-wide “Virtual Asset Platform Practitioners Examination” (CVAP).

The Association placed great importance on this regulatory dialogue. The delegation was led by Mr. Mofiz Chan, Chairman of the Association, and included Dr. Ricky Yeung and Mr. Eric Chia, Counilor, Mr. Mark Tong, Supplementary Counilor, and Dr. Raymond Chan, Officer. Mr. Tom Lam, Assistant Secretary General of the Hong Kong Clerical and Professional Employees General Union, also joined the meeting. Together, they were committed to safeguarding the rights and interests of local securities and futures practitioners and reflecting frontline concerns.

As Hong Kong’s virtual asset regulatory framework enters a new phase, the consultation conclusions published on 25 May have far-reaching implications for all licensed persons and intermediaries in Hong Kong. During the meeting, both sides discussed a number of specific policy changes, including

the removal of the previous 10% minimum exemption for virtual asset asset management

immediate effective date of the new rules without a transitional period.

However, the detailed implementation arrangements remain to be clarified. The Association’s representatives stated frankly that some of the new regulatory provisions are currently principle-based and lack specific operational guidelines, placing considerable compliance and operational adjustment pressures on institutions preparing to engage in, or already involved in, virtual asset businesses.

Focus Area 1: Authorisation of the CVAP Examination and Active Pursuit of Optimised Examination Arrangements

In the dedicated discussion on the CVAP examination and practitioner qualifications, the Association’s President raised a key query and proactively asked the SFC representatives: “The SFC often emphasises good corporate governance. Has the CVAP examination system and its related requirements, as promoted by the SFC, been formally authorised by the SFC Board through the internal approval process?”

In response, the SFC representatives did not directly address the question of Board authorisation during the meeting. Instead, they emphasised that the examination is conducted under the statutory powers conferred by the Securities and Futures Ordinance, with the aim of enhancing practitioners’ professional standards, and strongly encouraged existing licensees to take the examination as soon as possible. The Association expressed concern over this response, believing that the administrative decision-making process for an assessment system that significantly affects licensees’ practising rights should maintain a high degree of transparency.

At the same time, the Association’s representatives actively advocated during the meeting and successfully obtained positive responses and commitments from the SFC representatives, including:

Separation of course and examination:

The SFC indicated that it has communicated with the Hong Kong Securities and Investment Institute (HKSI) and will separate the course from the examination in future, allowing candidates to take the examination directly without being required to attend compulsory classes. This will significantly reduce talent training costs for firms.

Reduction of examination fees:

The standalone examination will provide official study materials, and the fees will be reduced to align with the current fees for papers such as Paper 2 and Paper 3, thereby effectively easing the financial burden on practitioners.

Focus Area 2: Reflecting the Operating Cost Pressures on VATP and Urging a Review of Technical and Compliance Requirements

The Association’ representatives raised practical industry difficulties with senior officials from the FSTB and the SFC, stating frankly that licensed platform operators are currently facing severe operational pressures and compliance costs. They urged the regulators, while ensuring safety, to flexibly adjust the following practical requirements in order to address the viability of virtual asset trading platforms (VATPs):

Promote diversification of hardware encryption technologies:

Currently, the supply of Hardware Security Modules (HSM) in Hong Kong is nearly monopolised by a single supplier, leading to persistently high costs and limited bargaining power for intermediaries. The Association urges the regulators to adopt a “technology-neutral” principle, accelerate the assessment and acceptance of new technologies such as Multi-Party Computation (MPC), or relax certification requirements to include other brands that meet national or international security standards such as FIPS 140-2, in order to foster market competition.

Review the hot/cold wallet ratio requirement:

The current SFC requirement stipulates that the hot wallet ratio must not exceed 2% of clients’ total assets, meaning at least 98% of client assets must be held in cold wallets. Additionally, regulators require that at least three individuals must be involved in each asset transfer, resulting in significant manpower and time costs in actual operations. The Association recommends that the authorities study the feasibility of optimising the hot/cold wallet ratio while keeping risks under control.

Review the insurance coverage requirement

: The current requirement for insurance coverage of up to 50% for cold wallets, coupled with the fact that only two insurance companies currently underwrite virtual asset insurance, has led to extremely high premiums (some industry feedback indicates that certain overseas insurers demand profit margins as high as 50%, significantly inflating premiums). The Association urges the regulators to actively coordinate with the insurance industry to study adjustments to the insurance coverage ratio or introduce more reasonable actuarial models for premium calculation, so as to alleviate the financial burden on firms.

Optimise on-chain transfer operational arrangements:

In view of the substantial “gas fees” generated by clients’ real-time transfers, the Association recommends that the regulators allow platforms to study, within a compliant framework, the feasibility of batch processing operations in order to reduce operational burdens and lower transaction costs.

Focus Area 3: Clarifying Regulatory Boundaries and Enhancing Approval Transparency

Clearly delineate the boundary between technology services and regulated activities:

For pure technology service providers, decentralised finance (DeFi) and advisory services, the industry expects a clearer definition of “regulated activities”. In particular, if an institution does not handle client assets or charge commissions or service fees, it should be clarified whether such activities constitute regulated activities, so as to avoid imposing unnecessary licensing burdens on pure technology service providers. The Association urges the regulators to provide categorical guidance for different business models (technology access, system development, trading support, advisory recommendations, etc.).

Enhance transparency in licensing approvals:

Regarding the recent surge in licence applications related to VASP, the Association noted that the SFC is currently facing recruitment difficulties and manpower constraints, leading to uncertainties in processing times. The Association recommends that the authorities draw reference from established models such as “serviced offices” and establish clearer timelines and phased reference frameworks for approvals, so that firms can more accurately plan resources, capital and manpower.

Accelerate approval of innovative products and clarify market arrangements for tokenised assets:

At present, the retail segment is largely limited to five spot currency pairs (BTC, ETH, AVAX, LINK, SOL), with only long positions available and a lack of risk hedging tools. Although the SFC published a high-level framework for perpetual contracts in February 2026, allowing licensed VATPs to offer perpetual futures to professional investors, the specific approval timelines for such products and the pilot requirements for liquidity providers (LPs) remain to be clarified. The Association urges the authorities to expedite the approval of relevant derivatives to enhance Hong Kong’s international competitiveness. In addition, the industry is concerned about the price discovery mechanisms, offshore data sources and the compliance basis for trading hours in relation to tokenised assets involving cross-market underlying assets such as stocks and commodities, and expects the regulators to provide clear guidance on these matters.

Clarify the regulatory division of labour for VA Payment:

The Association raised concerns about the regulatory issues arising from a number of companies holding only a Money Service Operator (MSO) licence issued by the Customs and Excise Department but effectively engaging in large-scale virtual asset payment activities. The MSO licence only covers the exchange and remittance of fiat currencies and does not effectively cover virtual asset payment businesses. The Association urges the authorities to clarify as soon as possible the division of responsibilities among the competent bodies and to announce a clear policy direction and timeline.

Guidelines for self-custody arrangements of private equity funds remain to be clarified:

The meeting also discussed arrangements allowing certain private equity funds to conduct self-custody. The industry is concerned about operational issues such as whether prior notification to the SFC is required, the mandatory requirements for self-custody (e.g. asset segregation, authority management), risk controls and audit standards. They expect the regulators to issue specific guidance as soon as possible to facilitate the establishment of internal compliance processes.

Conclusion: Continuing to Play a Bridging Role and Safeguarding the Rights and Interests of Colleagues

Mr. Mofiz Chan, Chairman of the Association, said after the meeting: “The parallel development of fintech and virtual assets is undoubtedly a new engine for Hong Kong to consolidate its status as an international financial centre. However, the successful implementation of any new regulations and assessment systems must be built upon maintaining a reasonable operating space for local intermediaries and safeguarding the transformation rights and interests of frontline practitioners. The Association will continue to uphold a professional and objective attitude and play a key bridging role between the industry and the regulators.”

The Association expressed its appreciation for the initial outcomes achieved in this meeting, including the SFC’s commitments to promote the separation of the CVAP examination from the course, optimise study materials and reduce assessment fees. Looking ahead, the Association will closely follow up on the implementation timeline of these measures and will continue to maintain professional communication with a high degree of transparency with the FSTB and the SFC’s Intermediaries Division on outstanding practical issues, such as the guidelines for self-custody by private equity funds, the boundary between technology services and regulated activities, and the regulatory framework for VA Payment. The Association will also reflect real industry operational data, striving to achieve the best balance among “market innovation, regulatory compliance and safety, and operational efficiency.”