Hong Kong regulators open doors to spot crypto ETFs

• Hong Kong’s SFC and HKMA are ready for spot crypto ETF applications.
• SFC revises rules, allowing funds direct exposure to spot virtual assets, emphasizing secure transactions.
• Contrary to China’s stance, Hong Kong attracts 11% of global crypto VC funding.

Hong Kong’s financial regulators, the SFC and the Hong Kong Monetary Authority (HKMA), have jointly announced their preparedness to accept applications for spot crypto ETFs.

This move positions Hong Kong as a forward-thinking financial hub embracing the evolving digital asset landscape.

SFC welcomes spot Crypto ETF applications

The move by Hong Kong’s financial regulators follows the SFC’s previous approval for licensed crypto providers to offer cryptocurrency futures ETFs, marking a significant expansion in the region’s crypto investment offerings.

In response to the increasing interest in spot crypto ETFs, the SFC has updated its regulatory framework. Departing from the previous “professional-investors-only” approach, the SFC’s revised rules, implemented in October, now facilitate broader investor participation in spot crypto and ETF investments.

The guidelines issued by the SFC specify criteria for funds seeking authorization to invest directly in spot virtual asset (VA) tokens. These tokens must be available to the Hong Kong public on SFC-licensed Virtual Asset Trading Platforms (VATPs). The SFC emphasizes that transactions conducted by these ETFs must occur through SFC-licensed crypto platforms or authorized financial institutions.

Hong Kong emerges as crypto investment hub

Contrary to China’s crackdown on crypto activities, Hong Kong continues to position itself as a welcoming environment for crypto firms. The region actively encourages collaboration with banks and has become a significant player in the global blockchain and crypto sectors, attracting over 11% of global venture capital funding.

The city’s strategic policies, including the issuance of cryptocurrency-related policy statements in October 2022 and the introduction of a crypto licensing system for virtual asset trading platforms in June, underline its commitment to becoming a global financial hub for digital assets.

This regulatory shift is particularly noteworthy as it coincides with global speculation about the potential approval of a spot bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) in the early weeks of the upcoming year.