Hong Kong Securities and Futures Commission (SFC) is preparing to accept applications for spot cryptocurrency ETFs as declared on December 22, although crypto transactions conducted by ETFs must occur through SFC-licensed c spot cryptocurrency ETFsrypto platforms or authorized financial institutions.
The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority, which serves as the de facto central bank of the city, jointly declared today that they have conducted a comprehensive evaluation of their existing regulations about intermediaries engaged in activities associated with virtual assets.
In addition to the established crypto futures ETFs, the SFC has indicated its preparedness to consider applications for the authorization of diverse funds, such as Virtual Asset Spot exchange-traded funds (VA Spot ETFs).
The SFC specifies the requirements for funds to “directly invest in identical spot Virtual Asset (VA) tokens that are accessible to the public in Hong Kong through SFC-licensed Virtual Asset Trading Platforms” (VATPs) in a separate circular dated December 22.
The SFC underscored the requirement that all cryptocurrency transactions involving these ETFs transpire via SFC-licensed crypto platforms or authorized financial institutions. In addition, the regulator stated that redemption and in-kind and cash contributions are acceptable for SFC-authorized spot Virtual Asset (VA) ETFs.
Concerning custody, the SFC mandated that the trustee or custodian of the fund should exclusively entrust its crypto custody duties to a Virtual Asset Trading Platform (VATP) licensed by the SFC or one that complies with the crypto custody criteria established by the HKMA.
The regulator added that for spot virtual asset valuation, the fund management companies “should adopt an indexing approach based on the volume of VA trades across major VA trading platforms.” The circular stated that funds intending to expose more than 10% of their net asset value to cryptocurrencies must consult with the SFC beforehand.
This year, Hong Kong has been a receptive environment for cryptocurrency firms, actively encouraging collaboration with banks, in contrast to mainland China’s pervasive crackdown on cryptocurrency activities.
Hong Kong issued policy statements regarding cryptocurrencies in October 2022 to bolster its reputation as a global financial center. The city implemented its crypto licensing system for virtual asset trading platforms in June. This system grants retail trading services to licensed exchanges.
