Hong Kong releases crypto ETF requirements ahead of US approval

The Hong Kong Securities and Futures Commission issued a joint circular with the city’s Monetary Authority outlining the conditions under which they would approve a spot crypto ETF

article-image

ADRIAN3388/Shutterstock modified by Blockworks

share

As investors in the US continue to speculate on the timeline for bitcoin ETF approval, Hong Kong is moving ahead with a regulatory framework for these investment vehicles.

The Hong Kong Securities and Futures Commission (SFC) issued a joint circular with the city’s Monetary Authority earlier this month. This release detailed the requirements under which the securities regulator would greenlight ETFs with more than 10% of holdings in crypto. 

The regulators noted in the circular that globally, the digital asset investment vehicle “landscape has been evolving rapidly,” and demand for such products has increased in Hong Kong. 

Spot crypto investment products should meet the same requirements Hong Kong regulators have for mutual funds and other structured investment products, the circular stated. 

Product issuers should also have a “good track record of regulatory compliance,” the SFC added, and employ “at least one competent staff member with relevant experience in the management of [virtual assets] or related products.” The regulators will also establish a list of permitted tokens that funds are allowed to hold, which are also available for spot trading on Hong Kong-approved crypto exchanges.

Products are not permitted to have leveraged exposure and issuers must work with approved exchanges to trade and purchase assets, the SFC said.  

The requirements come as Hong Kong continues to increase its regulatory presence over the crypto industry. In October 2022, the SFC started reviewing applications for futures crypto ETFs, which the US Securities and Exchange Commission first approved the year prior. 

Hong Kong launched its licensing program for crypto exchanges in June 2023, “enabling Hong Kong investors to directly access large-cap spot [virtual assets.],” the regulator said. 

The product guidelines also come months after the SFC and the Hong Kong Monetary Authority upped their regulatory requirements to make some virtual currency offerings only available to professional investors. The requirements made overseas crypto exchange-traded funds inaccessible to typical retail investors. 

The changes were part of an attempt by authorities to address the fallout from Hong Kong-based crypto exchange JPEX, which was embroiled in a $200 million scandal after luring investors with promises of returns as high as 20%. The platform ceased withdrawals amid regulatory warnings, leaving many, including those who invested life savings, in dire straits.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

The QT taper begins this month…but what does that mean for markets?

article-image

Plus, the rise of RWAs could bring about a significant shift in how real-world investments are managed and accessed

article-image

The distributed cell plan provider started selling its own hotspots in October 2023

article-image

The Brazil-based asset manager’s filing comes during a year of milestone bitcoin and ether fund approvals

article-image

The purchase of five sites in Georgia set to help CleanSpark hit its mid-year operating hash rate target of 20 EH/s

article-image

Plus, it’s beginning to look like we may be in for a cruel summer