Core Viewpoint - Hong Kong's Securities and Futures Commission is considering introducing virtual asset derivatives trading for professional investors, with a focus on robust risk management measures to ensure orderly and transparent trading [2][3]. Group 1: Market Development - The initial phase of the derivatives market is expected to pilot with perpetual contracts for mainstream virtual assets like Bitcoin and Ethereum, aligning with global regulatory trends [4]. - The introduction of derivatives trading is anticipated to increase the liquidity and vibrancy of the Hong Kong crypto market by over 50%, providing better hedging tools for investors [6]. Group 2: Current Market Status - Currently, Hong Kong has virtual asset futures ETFs in circulation, with three approved by the Securities and Futures Commission, and public trading of Bitcoin and Ethereum allowed since June 2023 [5]. - The revenue model for cryptocurrency exchanges heavily relies on derivatives trading, as evidenced by Coinbase's Q1 2025 report, which showed total revenue of $2.03 billion, with trading income constituting over 60% [5]. Group 3: Regulatory Framework - Professional investors in Hong Kong are defined as high-net-worth individuals or entities with specific asset thresholds, which include holding over HKD 40 million or an investment portfolio worth over HKD 8 million [3]. - The upcoming second policy declaration on virtual asset development will outline future policy directions, focusing on expanding the types of virtual asset products and services while ensuring investor protection [7].

Investment Rating - The report rates Futu Holdings as "Outperform" with a target price of HKD 125.00, projecting a P/E of 18 for 2025 and 14 for 2026 [1]. Core Insights - The report highlights the evolving regulatory landscape in Hong Kong's virtual asset sector, emphasizing the implementation of the Virtual Asset Service Provider (VASP) licensing system, which has led to increased institutional participation and product innovation [2][7]. - Hong Kong has become a leader in Asia for virtual asset ETFs, with a total of 6 spot ETFs and 3 futures ETFs currently available, reflecting a growing market for virtual asset investment products [3][38]. - The report discusses the strategic moves by traditional and internet brokers to enter the virtual asset market, including license upgrades and partnerships with licensed virtual asset trading platforms [4][30]. Summary by Sections 1. Current Status of Virtual Asset Development in Hong Kong - The VASP licensing system was implemented in June 2023, requiring all virtual asset trading platforms in Hong Kong to obtain licenses under the Anti-Money Laundering Ordinance [2][9]. - As of now, there are 10 licensed virtual asset trading platforms, 6 spot ETFs, and 3 futures ETFs in Hong Kong, with 38 brokers upgrading to provide virtual asset trading services [7][12]. 2. Current Status of Brokers Offering Virtual Asset Services - Internet brokers are rapidly establishing trading services, with three licensed platforms originating from internet broker backgrounds [3][31]. - Traditional brokers like Victory Securities are transitioning into the virtual asset space, achieving significant trading volumes [33][36]. 3. Insights from the Development of the Blockchain Industry in Hong Kong - Brokers are enhancing their market competitiveness through license upgrades, diversified product strategies, and collaborations with fintech companies [4][43]. - The report notes that brokers are actively pursuing innovative financial products and services to cater to the growing demand in the virtual asset market [43][44].