March 28, 2024
Hong Kong Welcomes Spot Crypto ETFs
Latest Cryptocurrency News

Hong Kong Regulator Opens Doors to Spot Crypto ETFs Amidst Growing Market Demand

Hong Kong is preparing to welcome spot crypto ETFs, with its financial regulator announcing on December 22nd its readiness to receive applications for these ETFs. The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority jointly announced a review of policies for intermediaries involved in virtual asset-related activities.

The SFC is open to applications for various funds, including virtual asset spot exchange-traded funds (VA Spot ETFs) and existing crypto futures ETFs. A circular released by the SFC on the same day outlines criteria for funds to invest directly in identical spot Virtual Asset (VA) tokens available to the Hong Kong public on SFC-licensed Virtual Asset Trading Platforms (VATPs). The regulator stressed the necessity for cryptocurrency transactions to occur through SFC-licensed crypto platforms or authorized financial institutions. Additionally, it highlighted that SFC-authorized spot Virtual Asset (VA) ETFs can conduct in-kind and in-cash subscriptions and redemptions.

Addressing custody concerns, the SFC specified that the fund’s trustee or custodian should only delegate crypto custody functions to an SFC-licensed Virtual Asset Trading Platform (VATP) or platforms meeting the crypto custody standards set by the HKMA. The regulator also emphasized that fund management companies should adopt an indexing approach based on VA trade volume across major VA trading platforms for spot virtual asset valuation. Funds planning to exceed 10% of their net asset value in crypto exposure must consult with the SFC beforehand, according to the circular.

While mainland China has been cracking down on cryptocurrency activities, Hong Kong has embraced crypto firms, encouraging collaboration with banks. In efforts to solidify its status as a global financial hub, Hong Kong issued policy statements on cryptocurrencies in October 2022 and initiated a crypto licensing system for virtual asset trading platforms in June of the same year.

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