Hong Kong ready to accept applications for spot cryptocurrency ETF
Hong Kong is preparing to pave the way for a spot cryptocurrency ETF, with financial regulators saying today they are ready to accept such applications.
in joint circular In an announcement today, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority, Hong Kong’s de facto central bank, said the two agencies have reviewed their existing policies for brokerages wishing to engage in virtual asset-related activities.
In addition to the existing cryptocurrency futures ETF, the SFC said, “We are prepared to accept applications for approval from other funds exposed to virtual assets, such as the virtual asset spot exchange-traded fund (VA spot ETF).”
Separate circular Announced today, the SFC sets out funding requirements for “investing directly in the same spot VA tokens that are accessible to the Hong Kong public for trading on the SFC-licensed virtual asset trading platform (VATP).”
strict requirements
The SFC clarified in its circular that cryptocurrency transactions made with such ETFs must be conducted through SFC-licensed cryptocurrency platforms or approved financial institutions.
“Both spot and cash subscriptions and redemptions are permitted for SFC-approved spot VA ETFs,” the regulator added.
Regarding custody, the SFC said that a fund’s trustee or custodian should only delegate cryptocurrency custody functions to an SFC-licensed VATTP or someone who meets the cryptocurrency custody standards issued by the HKMA.
For the valuation of spot virtual assets, fund management companies should “adopt an index approach based on VA trading volumes across major VA trading platforms,” the regulator continued.
According to the circular, funds wishing to have cryptocurrency exposure of more than 10% of their net asset value must have prior consultation with the SFC.
Cryptocurrency acceptance
In contrast to neighboring mainland China’s widespread crackdown on cryptocurrency trading and mining, Hong Kong has rolled out the welcome mat for cryptocurrency companies this year. They even encouraged them to cooperate with banks.
“They are very welcoming to the cryptocurrency industry and could potentially be one of the first in a developed financial market to approve a cryptocurrency spot ETF,” Jason Chan, partner at Hong Kong-based law firm Howse Williams, told The Block. said.
In October 2022, Hong Kong authorities issued a series of policy statements on cryptocurrencies to strengthen the city’s position as a global financial center. Last June, Hong Kong officially launched a cryptocurrency licensing regime for virtual asset trading platforms, allowing licensed exchanges to offer retail trading services.
Julia Leung, CEO of Hong Kong’s SFC, said in November that regulators were evaluating spot cryptocurrency ETFs because they welcomed “proposals using innovative technologies that increase efficiency and customer experience.” Hong Kong has currently listed several futures-based cryptocurrency ETFs, such as Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF.
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