Hong Kong’s Securities and Futures Commission said cryptocurrency transactions conducted by ETFs must occur through SFC-licensed crypto platforms or authorized financial institutions.
Hong Kong is getting ready to welcome spot crypto ETFs, as its financial regulator announced on
Dec. 22 that it is prepared to receive their applications.
In a collaborative announcement today, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority, the city’s de facto central bank, stated that both organizations have reviewed their current policy for intermediaries involved in virtual asset-related activities.
The SFC expressed readiness to receive applications for the authorization of various funds, including Virtual Asset Spot exchange-traded funds (VA Spot ETFs), alongside the existing crypto futures ETFs.
The SFC emphasized that cryptocurrency transactions conducted by these ETFs must occur through SFC-licensed crypto platforms or authorized financial institutions. The regulator added that in-kind and in-cash subscriptions and redemption are permissible for SFC-authorized spot Virtual Asset (VA) ETFs.
Regarding custody, the SFC specified that the fund’s trustee or custodian should only delegate its crypto custody function to an SFC-licensed Virtual Asset Trading Platform (VATP) or those meeting the crypto custody standards set by the HKMA.
The SFC expressed readiness to receive applications for the authorization of various funds, including Virtual Asset Spot exchange-traded funds (VA Spot ETFs), alongside the existing crypto futures ETFs.
In another circular issued on Dec. 22, the SFC outlines the criteria for funds to “directly invest in identical spot Virtual Asset (VA) tokens available to the Hong Kong public on SFC-licensed Virtual Asset Trading Platforms (VATPs).”
Regarding custody, the SFC specified that the fund’s trustee or custodian should only delegate its crypto custody function to an SFC-licensed Virtual Asset Trading Platform (VATP) or those meeting the crypto custody standards set by the HKMA.
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For spot virtual asset valuation, the fund’s management companies “should adopt an indexing approach based on VA trade volume across major VA trading platforms,” the regulator added. Funds planning to have crypto exposure exceeding 10% of their net asset value must undergo prior consultation with the SFC, the circular stated.In contrast to the widespread crackdown on cryptocurrency activities in mainland China, Hong Kong has been receptive to crypto firms this year, actively encouraging collaboration with banks.
In October 2022, Hong Kong issued policy statements on cryptocurrencies to enhance its status as a global financial hub. In June, the city initiated its crypto licensing system for virtual asset trading platforms, enabling licensed exchanges to provide retail trading services.