[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/sqmu.net\/guide\/2026\/04\/sqmu-in-hong-kong-how-the-open-source-protocol-aligns-with-sfc-guidance\/#BlogPosting","mainEntityOfPage":"https:\/\/sqmu.net\/guide\/2026\/04\/sqmu-in-hong-kong-how-the-open-source-protocol-aligns-with-sfc-guidance\/","headline":"SQMU in Hong Kong: How the Open\u2011Source Protocol Aligns with SFC Guidance","name":"SQMU in Hong Kong: How the Open\u2011Source Protocol Aligns with SFC Guidance","description":"Hong Kong is establishing itself as a leader in real estate tokenisation through a clear regulatory framework led by the Securities and Futures Commission (SFC). Tokenisation transactions are treated like traditional securities, ensuring compliance with existing laws. The SQMU protocol is designed to meet these regulatory expectations, promoting transparency and investor protection in this emerging market.","datePublished":"2026-04-03","dateModified":"2026-04-02","author":{"@type":"Person","@id":"https:\/\/sqmu.net\/author\/npvincent\/#Person","name":"Vincent","url":"https:\/\/sqmu.net\/author\/npvincent\/","identifier":81298481,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/d94cf1d4b33e5003c9d6729625a691370c0a6f7779f99eea52a9c190ec9eae9a?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/d94cf1d4b33e5003c9d6729625a691370c0a6f7779f99eea52a9c190ec9eae9a?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"SQMU"},"image":{"@type":"ImageObject","@id":"https:\/\/i0.wp.com\/sqmu.net\/wp-content\/uploads\/2026\/04\/image-1-e1775137336939.png?fit=768%2C768&ssl=1","url":"https:\/\/i0.wp.com\/sqmu.net\/wp-content\/uploads\/2026\/04\/image-1-e1775137336939.png?fit=768%2C768&ssl=1","height":768,"width":768},"url":"https:\/\/sqmu.net\/guide\/2026\/04\/sqmu-in-hong-kong-how-the-open-source-protocol-aligns-with-sfc-guidance\/","about":["Guide"],"wordCount":2752,"keywords":["compliance","ERC-1155","hong-kong-real-estate","open-source","real-estate-tokenisation-in-hong-kong","sfc","sqmu-standard","stablecoins-ordinance","tokenised-securities","vats"],"articleBody":"Summarize with AIPerplexityChatGPTClaudeGeminiDeepSeekIntroductionHong Kong has emerged as a leading jurisdiction for the tokenisation of real\u2011world assets, underpinned by a clear, principles\u2011based regulatory framework. At the heart of this framework is the Securities and Futures Commission (SFC), which has provided comprehensive guidance on tokenised securities\u2011related activities and the tokenisation of investment products. The SFC\u2019s approach is grounded in a \u201csee\u2011through\u201d philosophy: tokenised financial products are fundamentally traditional financial products with a tokenisation wrapper, and the existing legal and regulatory requirements governing traditional securities markets apply equally to tokenised products. This provides regulatory certainty for market participants while maintaining robust investor protections.For real estate tokenisation, this means that any token representing an ownership interest in property or a right to rental income will generally be treated as a security under the Securities and Futures Ordinance (Cap. 571) (SFO). The issuer must therefore comply with the SFO\u2019s prospectus and licensing requirements, unless an exemption applies. Additionally, the use of stablecoins for payments or distributions is now regulated under the Stablecoins Ordinance (Cap. 656), which establishes a licensing regime for fiat\u2011referenced stablecoin issuers.The open\u2011source SQMU protocol, where 1 token equals 1 verified square metre, is designed to align with Hong Kong\u2019s regulatory expectations. Built on ERC\u20111155 smart contracts, the SQMU standard provides determinism, transparency, and auditability\u2014qualities that the SFC expects of tokenisation arrangements. This article explores how the SQMU protocol can be implemented in compliance with SFC guidance, covering legal structuring, technical design, and ongoing obligations. For a detailed regulatory analysis of tokenised real estate in Hong Kong, refer to our comprehensive guide. For technical deployment, see the open\u2011source SQMU implementation.Hong Kong\u2019s Regulatory Framework for Tokenised Real EstateHong Kong\u2019s approach to digital assets is built on the principle of \u201csame business, same risks, same rules\u201d. The SFC has confirmed that tokenised securities are \u201cfundamentally traditional securities with a tokenisation wrapper\u201d and that the existing legal and regulatory requirements for traditional securities and investment products apply to tokenised securities.1. Securities and Futures Ordinance (Cap. 571)The SFO is the primary legislation governing securities and futures markets in Hong Kong. Under the SFO, a token that confers an ownership interest in real estate or a right to rental income is likely to fall within the definition of a \u201csecurity\u201d. Key regulatory pillars include:Prospectus requirements:\u00a0Any offer of tokenised securities to the public in Hong Kong must be authorised by the SFC or accompanied by a compliant prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32). If an offer is not authorised by the SFC or does not come with a compliant prospectus, it can only be made to professional investors or pursuant to applicable exemptions from the prospectus requirement.Licensing obligations:\u00a0Any person carrying on a business in dealing in tokenised securities, advising on them, or managing a fund investing in them may need to hold the appropriate SFC licence (e.g., Type 1 (dealing in securities), Type 4 (advising on securities), or Type 9 (asset management)).AML\/CFT compliance:\u00a0Licensed intermediaries must implement robust anti\u2011money laundering and counter\u2011financing\u2011of\u2011terrorism (AML\/CFT) programmes, including customer due diligence, transaction monitoring, and suspicious transaction reporting.2. Stablecoins Ordinance (Cap. 656)The Stablecoins Ordinance came into effect on 1 August 2025, establishing a formal licensing regime for fiat\u2011referenced stablecoin issuers. The ordinance is intended to strengthen market integrity, investor protection, and responsible innovation. Under the ordinance:Stablecoin issuers must obtain a licence from the Hong Kong Monetary Authority (HKMA).Licensed stablecoins are subject to reserve, capital, and disclosure requirements.Stablecoins issued by licensed issuers are not subject to the 12\u2011month track record requirement that applies to other virtual assets for retail offerings.For r3nt by SQMU, this means that if rental payments or investor distributions are made using a stablecoin, that stablecoin should ideally be issued by an HKMA\u2011licensed issuer to ensure regulatory alignment.3. Land Registration Ordinance (Cap. 128) and Land Titles Ordinance (Cap. 585)Hong Kong\u2019s land registration system currently operates under the Land Registration Ordinance (Cap. 128), which is a deeds\u2011registration system. This system does not support direct digital or fractional title registration. A new Land Titles Ordinance (Cap. 585) has been enacted and is expected to be implemented on a \u201cnew land first\u201d basis starting in 2027. The new system will provide a conclusive title register, potentially enabling direct digital registration of tokenised interests in the future.For now, tokenised real estate in Hong Kong must be structured using a legal vehicle that holds the property title (e.g., a special purpose vehicle or a limited partnership fund) and issues tokens representing shares or beneficial interests in that vehicle. This is consistent with the approach taken in Hong Kong\u2019s first real estate RWA project, which involved the tokenisation of a limited partnership fund holding an interest in a commercial building.Key SFC Guidance for Tokenised SecuritiesThe SFC has issued several circulars that provide direct guidance for tokenised securities activities. These circulars supersede the earlier 2019 Statement on Security Token Offerings and reflect a more mature, nuanced understanding of tokenisation technology.The November 2023 CircularsOn 2 November 2023, the SFC issued two landmark circulars:Circular on intermediaries engaging in tokenised securities\u2011related activities (Ref. No. 23EC52): This circular provides conduct\u2011related guidance to intermediaries engaged in tokenisation of securities\u2011related activities. It focuses on helping intermediaries address and manage the new risks arising from the use of tokenisation technology, so that the tokenisation marketplace can be developed in a healthy, responsible and sustainable manner.Circular on tokenisation of SFC\u2011authorised investment products (Ref. No. 23EC53)\u00a0: This circular sets out the requirements under which the SFC would consider allowing tokenisation of investment products authorised by the SFC for offering to the public in Hong Kong.Key requirements from these circulars include:Product provider responsibility:\u00a0Product providers remain ultimately responsible for the management and operational soundness of the tokenisation arrangement, regardless of any outsourcing.Record keeping:\u00a0Proper records of token holders\u2019 ownership interests must be maintained, and tokenised products should not be issued in bearer form.Due diligence:\u00a0Intermediaries must conduct due diligence on issuers, the products to be tokenised, the technology aspects of tokenisation, the features and risks arising from the tokenisation arrangement, and third\u2011party service providers.Risk management:\u00a0Appropriate measures must be in place to manage cybersecurity risks, data privacy, system outages and recovery, and a comprehensive and robust business continuity plan must be maintained.Custody:\u00a0Appropriate custodial arrangements must be in place that address the features and risks of the tokenised products.Blockchain selection:\u00a0Product providers should not use public\u2011permissionless blockchain networks without additional and proper controls (e.g., by using a permissioned token).Disclosure:\u00a0Adequate disclosure must be made regarding the tokenisation arrangement, including whether off\u2011chain and\/or on\u2011chain settlement is final, limitations imposed on token transfers, whether a smart contract audit has been conducted, the legal and beneficial title of the tokens, and potential challenges in the application of existing laws.The November 2025 Expansion CircularOn 3 November 2025, the SFC issued a Circular on expansion of products and services of virtual asset trading platforms (Ref. No. 25EC57) , which broadens the range of products that SFC\u2011licensed virtual asset trading platforms (VATPs) can offer. Key changes include:Removal of 12\u2011month track record requirement:\u00a0The SFC no longer requires virtual assets (including stablecoins) to have a 12\u2011month track record before a VATP offers them to professional investors.Stablecoins from licensed issuers:\u00a0Stablecoins issued by an HKMA\u2011licensed stablecoin issuer are not subject to the 12\u2011month track record requirement and can be offered to retail investors.Distribution of tokenised securities:\u00a0VATPs are now explicitly permitted to distribute tokenised securities in accordance with existing laws, codes, guidelines and regulations.Secondary Trading for Retail Investors (Under Consideration)In February 2026, the SFC announced that it is considering allowing licensed VATPs to provide secondary trading services for tokenised securities to retail clients. The authorities are studying the relevant requirements, operational risks, and control measures, and are drafting a related circular. Currently, Hong Kong retail investors can only subscribe to and redeem tokenised funds in the primary market. This potential expansion would significantly enhance liquidity for tokenised real estate investments.How SQMU Aligns with SFC GuidanceThe SQMU protocol is designed with transparency, auditability, and compliance as core principles. The following table maps SFC requirements to SQMU\u2019s features:SFC RequirementHow SQMU Addresses ItProduct provider responsibilityThe SQMU open\u2011source contracts are deployed by the product provider (e.g., the SPV or fund manager), who retains ultimate responsibility. All code is publicly auditable.Record keeping of token holdersThe ERC\u20111155 smart contract maintains an immutable, on\u2011chain record of token holders and their balances. No bearer tokens are issued.Due diligence on technologySQMU contracts are open source, auditable, and have been tested on multiple EVM chains. Providers can commission independent audits.Cybersecurity and business continuitySQMU contracts are immutable and can be deployed with upgradeable proxy patterns. Providers are responsible for their own operational security.Custodial arrangementsSQMU supports whitelist controls, allowing tokens to be restricted to wallets held by licensed custodians if required.Blockchain controlsSQMU can be deployed on permissioned or permissionless chains. For Hong Kong offerings, providers may choose to deploy on a permissioned EVM chain or add additional controls (e.g., whitelist, transfer restrictions).Disclosure of tokenisation arrangementSQMU\u2019s open\u2011source code and metadata standards facilitate full disclosure of the tokenisation arrangement to investors and regulators.Smart contract auditSQMU contracts are designed to be auditable, with NatSpec comments and test coverage. Audit reports can be published as part of the offering documentation.No bearer tokensSQMU tokens are held by whitelisted wallets, with ownership recorded on\u2011chain. There are no physical bearer instruments.Legal and beneficial titleThe SQMU token represents beneficial ownership in the underlying SPV or fund. Legal title remains with the SPV, aligning with the SFC\u2019s see\u2011through approach.1. Legal Structuring: The SPV or LPF ModelAs noted by the SFC, tokenised securities are fundamentally traditional securities with a tokenisation wrapper. For real estate, this means that the token must represent an interest in a legal entity that holds the property title. Common structures in Hong Kong include:Special Purpose Vehicle (SPV):\u00a0A company incorporated in Hong Kong holds the property title. The company\u2019s shares are tokenised, and token holders are shareholders.Limited Partnership Fund (LPF):\u00a0A limited partnership registered under the Limited Partnership Fund Ordinance holds the property interest. Token holders are limited partners.The SQMU standard\u2019s 1\u202fm\u00b2 = 1 token principle maps directly to the SPV\u2019s or LPF\u2019s share\/unit capital. If a property has a total area of 1,000\u202fm\u00b2, the SPV issues exactly 1,000 shares, and each SQMU token corresponds to one share. This eliminates abstraction and makes valuation transparent.2. Token Design and Smart Contract DeploymentThe SQMU smart contracts are built on the ERC\u20111155 standard, which allows a single contract to represent multiple properties (via different token IDs) with fungible supply per token ID. Key features for Hong Kong compliance include:Fixed supply:\u00a0Total supply for each property equals its certified area, preventing dilution.Whitelist controls:\u00a0Transfer functions can be restricted to approved wallets only, ensuring that only KYC\u2011verified investors can hold tokens.Transfer restrictions:\u00a0Optional lock\u2011up periods or trading windows can be enforced.Upgradeability:\u00a0Using proxy patterns, contracts can be upgraded to address regulatory changes or add new features.The open\u2011source nature of the SQMU contracts allows the SFC and auditors to inspect the code and verify that it complies with regulatory expectations.3. Compliance with the Stablecoins OrdinanceFor rental payments or investor distributions, r3nt by SQMU can integrate with stablecoins issued by HKMA\u2011licensed issuers. Under the Stablecoins Ordinance, such stablecoins are subject to reserve, capital, and disclosure requirements, providing assurance to investors and regulators. The SFC\u2019s November 2025 circular confirms that stablecoins issued by licensed issuers are not subject to the 12\u2011month track record requirement and can be offered to retail investors.4. Offering and Prospectus ComplianceIf the token offering is made to the public in Hong Kong, a prospectus must be authorised by the SFC or registered under the Companies Ordinance. For offerings limited to professional investors, the prospectus requirement does not apply. The SQMU plugin\u2019s admin dashboard can help manage investor onboarding and whitelisting to ensure that only eligible investors participate.5. Ongoing Reporting and AML ComplianceLicensed intermediaries must file annual returns and maintain AML programmes. The SQMU open\u2011source architecture facilitates compliance by providing transparent on\u2011chain records of token holders, transfers, and distributions, which can be integrated with reporting systems.Hong Kong\u2019s First Real Estate RWA Project: A PrecedentIn February 2026, Hong Kong\u2019s first real estate RWA (Real World Asset) tokenisation project was approved by the SFC. The project involves the tokenisation of a limited partnership fund holding an interest in Derlin Building, a commercial property in Hong Kong\u2019s Central business district. The approval took the form of a \u201cno\u2011action letter\u201d, reflecting the SFC\u2019s case\u2011by\u2011case approach to early\u2011stage RWA projects.This precedent demonstrates that the SFC is open to real estate tokenisation, provided that the structure complies with existing securities laws and that investor protections are in place. The SQMU standard, with its emphasis on transparency, auditability, and legal alignment, is well\u2011positioned to serve as the technical foundation for similar projects in Hong Kong.Practical Steps for Tokenising Hong Kong Real Estate with SQMUFor property owners, developers, or agents looking to tokenise a Hong Kong real estate asset using SQMU, the following steps outline a typical compliance\u2011focused pathway:Engage with Licensed Professionals:\u00a0Work with an SFC\u2011licensed intermediary (e.g., Type 1 licensee for dealing in securities) and legal counsel familiar with Hong Kong property and securities laws.Determine the Offering Structure:\u00a0Decide whether the offering will be made to professional investors only (exempt from prospectus requirements) or to the public (requiring SFC authorisation).Form the Legal Vehicle:\u00a0Establish an SPV or LPF to hold the property title. Ensure that the vehicle\u2019s constitutional documents reflect the tokenisation arrangement.Certify Property Area:\u00a0Engage a registered surveyor to verify the property\u2019s total floor area in square metres.Deploy SQMU Smart Contracts:\u00a0Use the open\u2011source SQMU contracts to deploy the token contract, setting total supply to the certified area. Add whitelist controls and transfer restrictions as required.Obtain Legal Opinion:\u00a0Obtain a legal opinion confirming that the tokenisation structure complies with the SFO and that the token is not a \u201cbearer instrument\u201d (which would trigger additional restrictions).Audit Smart Contracts:\u00a0Commission an independent audit of the smart contracts. Publish the audit report as part of the offering documentation.Onboard Investors:\u00a0Conduct KYC\/AML checks and whitelist eligible wallets.Execute the Offering:\u00a0Distribute tokens to investors, either via a primary issuance contract or through a licensed intermediary.Ongoing Compliance:\u00a0Maintain records, file annual returns, and ensure that secondary trading (if any) occurs only on SFC\u2011licensed VATPs.The SQMU WordPress plugin simplifies deployment, turning a standard WordPress site into a full\u2011featured tokenisation platform with one\u2011click contract deployment, admin dashboards, and wallet\u2011enabled shortcodes.ConclusionHong Kong\u2019s regulatory framework for tokenised securities is among the most advanced in the world. The SFC\u2019s see\u2011through approach, combined with the Stablecoins Ordinance and the expansion of VATP products, provides a clear pathway for compliant real estate tokenisation. The SQMU open\u2011source protocol, with its 1\u202fm\u00b2 = 1 token standard, fixed supply, whitelist controls, and auditability, is designed to align with these regulatory expectations.For property owners and developers seeking to tokenise Hong Kong real estate, the SQMU standard offers a transparent, auditable, and regulator\u2011friendly foundation. By leveraging the open\u2011source codebase and the SQMU WordPress plugin, market participants can deploy compliant tokenisation solutions with confidence.For expert guidance on regulatory approvals, legal structuring, and smart contract deployment in Hong Kong, consulting services are available to navigate the specific requirements of the SFC framework.Further ReadingReal Estate Tokenisation in Hong Kong: Regulatory FrameworkOpen Source Real Estate Tokenisation: The SQMU StandardSQMU Standard: Real Estate Tokenisation by the Square Metrer3nt: A Structured Framework for Tokenised Rental ContractsHow Distribution, Investor Access, and Market Making Drive Tokenised Real Estate PlatformsShare with friends:\t\t\t\tShare on Telegram (Opens in new window)\t\t\t\tTelegram\t\t\t\t\t\t\tShare on WhatsApp (Opens in new window)\t\t\t\tWhatsApp\t\t\t\t\t\t\tEmail a link to a friend (Opens in new window)\t\t\t\tEmail\t\t\t\t\t\t\tShare on LinkedIn (Opens in new window)\t\t\t\tLinkedIn\t\t\t\t\t\t\tShare on Facebook (Opens in new window)\t\t\t\tFacebook\t\t\t"},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Guide","item":"https:\/\/sqmu.net\/guide\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"2026","item":"https:\/\/sqmu.net\/guide\/\/2026\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"04","item":"https:\/\/sqmu.net\/guide\/\/2026\/\/04\/#breadcrumbitem"},{"@type":"ListItem","position":4,"name":"SQMU in Hong Kong: How the Open\u2011Source Protocol Aligns with SFC Guidance","item":"https:\/\/sqmu.net\/guide\/2026\/04\/sqmu-in-hong-kong-how-the-open-source-protocol-aligns-with-sfc-guidance\/#breadcrumbitem"}]}]