Hong Kong Financial Regulators Will Consider Spot Crypto ETFs

Table of Contents

• Policy Review
• ETF Mania

Hong Kong’s financial regulatory bodies are prepared to consider applications for spot crypto ETFs. 

In a December 22 joint statement, Hong Kong’s Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) said they are ready to receive applications for spot crypto exchange-traded funds (ETFs). 

Policy Review

The SFC and the HKMA, Hong Kong’s central bank, said in their statement that both organizations had reviewed their current policy on ETFs and said the virtual asset environment has evolved since the SFC established a “professional-investor only” regulatory approach in 2018.

The SFC said it is now open to receiving applications to authorise various funds, including Virtual Asset Spot ETFs (VA Spot ETFs) and existing crypto futures ETFs.

“The SFC and the HKMA have reviewed their existing policy for intermediaries wishing to engage in virtual asset-related activities (VA-related activities). The updated policy reflects the latest market developments, including the SFC’s authorization of VA futures ETFs and readiness to accept applications for other funds with exposure to virtual assets, such as virtual asset spot exchange-traded funds (VA spot ETFs),” said the statement. 

In a separate statement, the SFC named the criteria for funds to “directly invest in identical spot Virtual Asset (VA) tokens available to the Hong Kong public on SFC-licensed Virtual Asset Trading Platforms (VATPs).” 

The SFC-specified crypto transactions conducted via ETFs must occur through SFC-licenced platforms or authorised financial institutions. The SFC further stated that a fund’s trustee or custodian should only delegate its custody function to an SFC-licensed Virtual Asset Trading Platform or platform meeting custody standards set by the HKMA. 

ETF Mania

Amid the ETF anticipation in the US, Hong Kong is also embracing the trend. HSBC Hong Kong recently expanded support for Bitcoin and Ethereum futures ETFs. The UBS Group also announced that it would allow select clients in Hong Kong to trade crypto-linked ETFs. 

The crypto market has been abuzz in anticipation of the SEC approval of the first spot Bitcoin ETF in the US. Contenders such as BlackRock, Fidelity and Grayscale have submitted applications and had to amend applications to address the SEC’s concerns over spot ETFs. However, the SEC is expected to soon approve some of these applications. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.