Hong Kong Regulator Opens Gates for Spot Crypto ETFs, Encourages Crypto Businesses
Summary:
Hong Kong's financial regulator, the Securities and Futures Commission (SFC), in cooperation with the Hong Kong Monetary Authority, is set to accept applications for spot crypto ETFs. The SFC has laid out regulations and criteria for funds wanting to invest in spot Virtual Asset (VA) tokens, emphasizing secure transaction processing, appropriate custody provisions, and accurate asset valuation. Despite a crackdown in mainland China, Hong Kong continues fostering crypto businesses and strengthening its role as a global financial hub.
Hong Kong is poised to accept spot crypto ETFs following an announcement from the city's financial regulator on December 22nd, indicating readiness for the submission of such applications. In a joint statement, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority, the city's primary central bank, said they have reevaluated their policy concerning intermediaries partaking in digital asset activities. The SFC is open to authorize a variety of funds, which includes Virtual Asset Spot exchange-traded funds (VA Spot ETFs) as well as the existing crypto futures ETFs.
The SFC issued a separate directive on December 22nd, setting out the requirements for funds wishing to invest directly in spot Virtual Asset (VA) tokens available to the public in Hong Kong through SFC-licensed Virtual Asset Trading Platforms (VATPs). The SFC stressed the importance of ensuring cryptocurrency transactions conducted by these ETFs are processed via SFC-authorized crypto platforms or approved financial institutions. Additionally, allowing in-kind and in-cash subscriptions and redemptions are suggested for SFC-approved spot Virtual Asset (VA) ETFs.
In terms of custody, the fund's trustee or custodian should only entrust its crypto custody duties to a VATP licensed by SFC or entities that meet the crypto custody norms set by the HKMA. For the valuation of spot virtual assets, the SFC suggests that fund management companies implement an indexing method based on VA trade volume across leading VA trading platforms. The regulator added that funds planning to have a crypto exposure surpassing 10% of their net asset value should first consult with the SFC.
Contrasting the widespread suppression of cryptocurrency activities in mainland China, Hong Kong has maintained a welcoming stance towards crypto businesses this year, actively promoting cooperation with banks. In October 2022, Hong Kong released policy statements regarding cryptocurrencies to strengthen its standing as an international financial hub. In June, the city introduced a crypto licensing system for virtual asset trading platforms, facilitating eligible exchanges to offer retail trading services.
Published At
12/22/2023 3:58:20 PM
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