Hong Kong Prepares for Spot Crypto ETF
Hong Kong is preparing to clear the way for spot crypto exchange-traded funds (ETFs). Its financial regulator claimed it is ready to begin accepting these applications. In a notice, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) claimed they had assessed their current policy for mediators who intend to take part in virtual asset-associated activities.
Besides the current crypto futures exchange-traded funds, the SFC claimed it is ‘ready to receive applications for the approval of other funds with virtual assets exposure.
Hong Kong Seeks to Become Crypto-Friendly Country
A different circular revealed that the Securities and Futures Commission makes the stipulations for funds to ‘invest directly in similar spot VA tokens accessible to Hong Kong residents for trading on virtual asset trading platforms (VATPS) approved by the SFC.
In the notice, the Securities and Futures Commission noted that transactions involving crypto created using these kinds of exchange-traded funds must be done via SFC-approved crypto platforms or approved financial entities. Additionally, the regulator said that in-kind and in-cash redemption and subscription are permitted for SFC-approved spot virtual asset exchange-traded funds.
Concerning custody, the Securities and Futures Commission noted that the fund’s custodian or trustee must only pass on its crypto custody function to an SFC-approved virtual asset trading platform. Alternatively, the function can be given to those that meet HKMA’s crypto custody requirements.
Concerning spot virtual assets’ valuation, the fund’s management firms ‘must embrace an indexing strategy founded on virtual asset trading volume in major asset virtual asset trading platforms. The circular also noted that earlier consultation with the Securities and Futures Commission is mandatory for funds planning to have crypto exposure above 10% of its net asset value.
Crypto Adoption Surges in Hong Kong
Different from the adjacent Chinese mainland’s vast cryptocurrency mining and trading crackdown, Hong Kong has introduced the welcome mat for crypto companies in 2023 to the extent of motivating banks to work with them.
Jason Chan, partner of Howse Williams, a Hong Kong-founded law company, said they are quite welcoming to the crypto sector and would possibly be among the first to sanction a crypto spot exchange-traded fund by an established financial market.
In October last year, Hong Kong authorities released several policy statements regarding cryptocurrencies to bolster its place as an international financial center.
Last month, Julia Leung, the CEO of Hong Kong’s Securities and Futures Commission, said the regulator was evaluating spot crypto exchange-traded funds as it prepares to receive ‘proposals utilizing innovative technology that enhances client experience and efficacy.’
Further, some futures-founded crypto ETFs have been listed in Hong Kong. They include CSOP Bitcoin Futures ETF, Samsung Bitcoin Futures Active ETF, and CSOP Ether Futures ETF.
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