- Hong Kong’s Securities and Futures Commission is prepared to accept applications for spot crypto ETFs, outlining requirements for trading, custody, valuation, and exposure.
- This move signals Hong Kong’s intention to pave the way for spot crypto ETFs as it embraces cryptocurrencies, in contrast to mainland China’s crypto crackdown.
- Approving spot crypto ETFs would boost Hong Kong’s status as a crypto-friendly jurisdiction and expand options for institutional investors, cementing its reputation as a crypto hub.
The Securities and Futures Commission of Hong Kong has announced its readiness to accept applications for spot crypto exchange-traded funds (ETFs). This move signals Hong Kong’s intention to pave the way for spot crypto ETFs as it continues embracing cryptocurrencies.
Requirements for Spot Crypto ETFs
The Securities and Futures Commission (SFC) published two circulars outlining the requirements for spot crypto ETFs. The SFC stated that it is prepared to accept applications for funds with exposure to virtual asset-based activities, including Bitcoin spot ETFs.
According to the SFC, spot crypto ETF transactions must be conducted through licensed crypto platforms or authorized financial institutions. Both in-kind and in-cash subscription/redemption are permitted. The SFC also specified crypto custody requirements – funds can only delegate custody to licensed platforms or those meeting HKMA standards.
For valuation, fund managers should use an indexing approach based on trading volumes across major platforms. Prior consultation with the SFC is required for funds with over 10% crypto exposure.
Hong Kong Welcomes Crypto Industry
Unlike mainland China’s crypto crackdown, Hong Kong has embraced crypto firms this year. The government has encouraged banks to work with them. In October 2022, Hong Kong released policy statements to strengthen its position as a global financial hub. It also launched a licensing regime for crypto exchanges.
Hong Kong’s welcoming stance contrasts the mainland’s hostility. The city is likely to be one of the first developed markets to approve a spot crypto ETF. This would boost Hong Kong’s status as a crypto-friendly jurisdiction.
Conclusion
With its readiness to approve spot crypto ETFs, Hong Kong is cementing its reputation as a crypto hub. The requirements set by the SFC balance innovation with prudent regulation. Spot crypto ETFs would expand options for institutional investors in Hong Kong. Overall, this development highlights Hong Kong’s progressive approach towards cryptocurrency.
