Hong Kong is preparing to embrace spot crypto-ETFs, as its financial regulator has announced that it is ready to accept applications for authorization of such funds.
A joint statement from the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority, which is effectively the city's central bank, indicated that both organizations have reviewed their current policies on virtual asset intermediaries.
The SFC has expressed its willingness to accept applications for authorization of various funds, including virtual asset exchange-traded funds (VA Spot ETFs), along with existing cryptocurrency futures ETFs.
In another circular issued on December 22, the SFC presented the criteria for funds to "directly invest in identical virtual asset (VA) spot tokens available to the Hong Kong public on SFC-licensed virtual asset trading platforms (VATPs)."
The SFC stressed that cryptocurrency transactions conducted by these ETFs must be conducted through SFC-licensed crypto platforms or authorized financial institutions. The regulator added that subscription and redemption of ETF shares should only be made available to the public through participants with appropriate licenses.
"To value virtual assets, fund management companies should adopt an indexation approach based on trading volume on the underlying platforms. Funds planning to use cryptocurrency in excess of 10% of their net asset value must have prior consultation with the SFC"the regulator added.
The decision is part of a broad trend to regulate cryptocurrency assets in Hong Kong. Last year, the SFC implemented new rules for virtual asset trading platforms (VATPs), requiring them to obtain a license from the regulator and meet certain safety and investor protection standards.
This new authorization to accept #spot crypto-ETFs gives investors more opportunities to diversify their portfolio and participate in the cryptocurrency market without buying and holding assets directly. In addition, it may also attract new investors and increase the liquidity of the cryptocurrency market in Hong Kong.
However, despite opening up to spot crypto-ETFs, #Hong Kong remains cautious about cryptocurrency assets and continues to regulate them. Regulators aim to protect investors from high risk and possible fraudulent schemes.
