Hong Kong Opens Doors for Spot Crypto ETFs, Issues Circular for Applications

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Published: December 22, 2023 at 7:39 am Updated: December 22, 2023 at 7:40 am

Edited and fact-checked:
December 22, 2023 at 7:39 am

In Brief

Hong Kong’s SFC and HKMA announced it will accept applications for virtual asset spot ETFs, in addition to crypto futures ETFs.

Hong Kong Regulators Announce Readiness to Accept Spot Crypto ETF Applications

The Hong Kong Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) today published a joint circular, where both agencies reviewed their existing policies for intermediaries and outlined their intentions to engage in virtual asset-related activities.

The SFC announced its readiness to accept applications for the authorization of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds (VA spot ETFs) in addition to cryptocurrency futures ETFs.

Another circular issued at the same time by the SFC detailed the requirements for funds to invest directly in the same spot VA tokens accessible to the Hong Kong public for trading on SFC-licensed virtual asset trading platforms (VATPs).

Transactions involving crypto by such ETFs must be conducted through SFC-licensed crypto platforms or authorized financial institutions, with both in-kind and in-cash subscription and redemption permitted for SFC-authorized spot VA ETFs.

The SFC specified that the trustee or custodian of the fund should delegate its crypto custody function only to an SFC-licensed VATP or those meeting the crypto custody standards issued by the HKMA.

For the valuation of spot virtual assets, the fund’s management companies should adopt an indexing approach based on VA trade volume across major VA trading platforms.

Hong Kong’s Progressive Crypto Regulations

Hong Kong continues to assert itself as a leading hub for digital assets in the Asia-Pacific region, with regulators maintaining a progressive stance toward cryptocurrencies. Currently, the city has listed several futures-based crypto ETFs, including the Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF and CSOP Ether Futures ETF.

Earlier this year, Hong Kong officially initiated its crypto licensing regime for virtual asset trading platforms, enabling licensed exchanges to provide retail trading services. OSL and HashKey Exchange became the first exchanges to offer retail crypto services in the city.

The recent announcement by the SEC and HKMA highlights the city’s progressive approach to cryptocurrencies, further reinforcing its position as a leader in the evolving digital asset landscape.

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About The Author

Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and engagement with scientific writing.

Alisa Davidson