Hong Kong's Securities and Futures Commission (SFC) and the Accounting and Financial Reporting Council (AFRC) signed a memorandum of understanding on Monday that extends their financial reporting and audit oversight to SFC-licensed virtual asset service providers.

The agreement covers financial and compliance reporting by licensed crypto firms, licensed corporations, registered open-ended fund companies and authorized funds. It also encompasses related audit and assurance work carried out for those entities.

What does the new MoU change in practice?

The MoU establishes a formal framework for information sharing, case referrals, mutual assistance and coordinated inspections and investigations between the two regulators. That means a licensed crypto exchange or fund manager facing an AFRC audit inquiry can now expect structured data exchange with the SFC, rather than ad hoc cooperation between the agencies.

For licensed virtual asset service providers, the operational consequence is a second regulator with direct visibility into their books. Firms that already hold SFC licenses will need audit and assurance processes that can withstand joint scrutiny — an additional compliance burden layered on top of existing SFC supervision.

The agreement supersedes a 2021 MoU signed between the SFC and the Financial Reporting Council, the AFRC's predecessor. The FRC was renamed the AFRC in 2022, and Monday's pact brings the cooperation framework up to date with the regulator's expanded mandate.

SFC Chair Kelvin Wong said the expanded cooperation would provide "more comprehensive oversight" across a broader range of entities and activities in Hong Kong's financial sector.

How does the MoU fit Hong Kong's broader crypto push?

The agreement lands amid a sustained expansion of Hong Kong's digital asset regulatory framework. In January, regulators outlined plans for new rules covering crypto advisory services. The SFC has also introduced frameworks for virtual asset margin financing and perpetual contracts, extending regulated leverage products to the licensed market.

Taken together, these measures show Hong Kong building out the supervisory plumbing around its licensing regime rather than simply expanding the list of permissible activities. Audit oversight is the back-office counterpart to front-line conduct rules: as more licensed entities hold client assets and offer leveraged products, the quality of their financial reporting becomes a systemic concern.

What comes next for licensed firms?

The MoU takes immediate effect as the operative cooperation framework between the SFC and AFRC. Licensed virtual asset service providers and their auditors should expect coordinated inspections under the new mechanism as both agencies staff up their digital asset supervision capabilities, and as the January proposals on crypto advisory services move toward formal rulemaking.