Saxo Financial fined HKD 4 million by Hong Kong Securities and Futures Commission, virtual asset trading compliance warning rings again

January 6, 2026, the Hong Kong Securities and Futures Commission issued a public statement condemning and fining Schwab Financial (Hong Kong) Limited HKD 4 million for violations related to the distribution of virtual asset products to retail clients.

Between November 1, 2018, and November 25, 2022, Schwab Financial distributed 32 unregulated virtual asset products to 130 retail clients and 6 professional investors through its online platform, executing 1,446 transactions.

01 Details of Violations

The investigation by the Hong Kong SFC revealed the severity of Schwab Financial’s systemic violations. According to two key circulars issued by the SFC, these virtual asset products should only have been sold to professional investors, but Schwab Financial opened trading access to a large number of retail clients.

The violations lasted over four years, involving all products classified as complex products, including 21 exchange-traded derivatives. Regulators found that Schwab Financial failed entirely to assess whether clients had the necessary knowledge to invest in virtual assets.

More seriously, the company also did not provide sufficient information or warnings regarding virtual assets, directly violating the guidelines outlined in the SFC circular.

02 Regulatory Gaps and Internal Control Failures

Schwab Financial’s violations were not accidental but stemmed from systemic internal control failures. The investigation found that during the entire period of misconduct, the company lacked specific procedures for conducting due diligence on virtual asset products.

Schwab Financial relied solely on its parent company’s group-wide policies to identify investment instruments involving virtual assets. Due to obvious deficiencies in these policies, 32 virtual asset products were not properly identified, resulting in all clients being able to trade these products regardless of their status as professional investors.

It was only after being notified by its parent company in November 2022 that Schwab Financial became aware of this significant loophole. The SFC pointed out that the company failed to implement adequate and effective policies and monitoring measures to properly supervise online platform operations.

03 Latest Trends in the Cryptocurrency Market

As the Hong Kong SFC announced this disciplinary action, the global cryptocurrency market was experiencing a complex situation. According to Schwab Bank’s market update on January 6, 2026, Bitcoin’s price remained relatively stable at around $93,700.

Ethereum performed even more strongly, trading at approximately $3,240. Major alternative tokens also showed strength, with XRP trading at about $2.27 and Solana at around $138.8.

Notably, stocks related to crypto assets performed well, with IBIT up about 5%, and ETHA up about 4%, reflecting an improved risk appetite in the broader market.

04 Multiple Considerations in Regulatory Penalties

The Hong Kong SFC considered multiple factors when deciding on this disciplinary action. Schwab Financial’s misconduct lasted over four years, which was a key factor in the penalty.

On the other hand, Schwab Financial also took some mitigating actions: voluntarily reporting misconduct to the SFC; implementing remedial measures, including voluntary compensation for clients’ losses; ceasing relevant regulated activities; cooperating with investigations and accepting the findings.

The SFC explicitly stated that Schwab Financial’s failures constituted violations of the “Guidelines on Online Distribution and Investment Advisory Platforms” and the “Code of Conduct.”

05 Direct Harm to Retail Clients

Regulators’ investigation showed that Schwab Financial’s violations posed potential risks to a large number of retail clients. 87 clients participated in 21 transactions involving exchange-traded derivatives of virtual assets, including 82 retail clients and 5 individual professional investors.

For these clients, Schwab Financial failed to adequately assess their understanding of derivatives and did not appropriately classify them based on their knowledge levels. The company did not ensure that complex virtual asset product transactions executed via the online platform were suitable for all clients.

The SFC specifically pointed out that Schwab Financial’s platform did not provide sufficient information or appropriate warnings about the main nature, features, and risks of such virtual assets.

06 Global Trends in Virtual Asset Regulation

The Schwab Financial incident reflects the increasing global trend toward stricter regulation of virtual assets. As an international financial center, Hong Kong is establishing a comprehensive virtual asset regulatory framework.

This enforcement sends a clear signal to all virtual asset service providers operating in Hong Kong: strict adherence to investor suitability principles is mandatory, especially for complex virtual asset products.

Other financial centers worldwide are also strengthening virtual asset regulation, including the EU’s Markets in Crypto-Assets Regulation (MiCA) and regulatory initiatives in the US. These developments indicate that the virtual asset industry is gradually moving from “wild growth” to “regulated development.”

The cryptocurrency market is highly sensitive to regulatory dynamics. When policies become clearer, markets tend to develop in a healthier environment. Bitcoin’s stable price around $93,700 partly reflects the market’s adaptation to the gradual establishment of regulatory frameworks.

07 New Standards for Platform Security and Compliance

The Schwab Financial case highlights the importance of internal controls and compliance procedures in crypto trading platforms. The lack of proper product due diligence processes and client assessment mechanisms not only violates regulatory requirements but also exposes clients to unnecessary risks.

For platforms like Gate and other crypto exchanges, this incident underscores the need to establish strict internal control systems, especially for distributing complex products; to implement effective client suitability assessment procedures; and to ensure platforms provide comprehensive risk disclosures and educational materials.

Additionally, crypto trading platforms should regularly review and update their compliance policies to meet evolving regulatory requirements. Before launching new products, thorough due diligence should be conducted to identify product risk features and target client groups.

Unlike Schwab Financial’s reliance on parent company policies, professional crypto trading platforms should develop dedicated review procedures tailored to the characteristics of virtual assets, fully considering their unique risks and complexities.

Future Outlook

As of January 7, 2026, the global cryptocurrency market remains stable, with Bitcoin trading around $92,700 and Ethereum near $3,240. Regulatory intervention is gradually guiding the industry toward more standardized development.

The Hong Kong SFC’s sanctions against Schwab Financial mark the beginning of a new era — virtual asset trading platforms must face increasingly strict compliance scrutiny. Technology can innovate, but the fundamental principles of financial security remain unchanged.