The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) released a joint circular yesterday titled “Joint Circular on Intermediaries’ Virtual Asset-Related Activities.” In the circular, they stated that they have reviewed the existing regulatory policies for intermediaries wishing to engage in virtual asset-related activities. After careful consideration, they have decided to accept applications for authorization of “other funds involving virtual assets,” in addition to existing cryptocurrency futures exchange-traded funds (ETFs), including cryptocurrency spot ETFs.
Background:
Hong Kong Web3.0 Summit: ICC Announces Launch of “ICC Camp Accelerator” to Promote Web3 Game Ecology Development
Supplemental Information:
Hong Kong Announces Plans to Issue Digital Green Bonds in Collaboration with HSBC, UBS, Bank of China, Exploring Blockchain Potential
The SFC and HKMA issued a joint circular yesterday (22nd) regarding intermediaries’ virtual asset-related activities. They stated that they have reviewed the existing regulatory policies for intermediaries wishing to engage in virtual asset-related activities and have decided, after careful consideration, to accept applications for authorization of “other funds involving virtual assets,” in addition to existing cryptocurrency futures ETFs. This includes cryptocurrency spot ETFs.
Further reading:
Hong Kong SFC Greenlights Consideration of “Bitcoin Spot ETF” for Retail Trading, Provided Regulatory Requirements Are Met
Regulatory requirements for spot ETFs:
According to the announcement, the SFC has made the following requirements for cryptocurrency spot ETFs:
– Virtual asset trades involving spot ETFs should be conducted through SFC-licensed virtual asset trading platforms (VATPs) or authorized financial institutions.
– Such ETFs allow subscriptions and redemptions in cash or in kind.
– Regarding custody, the fund’s custodial service provider can only entrust its custody to SFC-licensed virtual asset trading platforms or financial institutions that meet the HKMA’s cryptocurrency custody standards.
– For the valuation of virtual assets, fund management companies should adopt an index-based approach based on the trading volume of virtual assets on major trading platforms.
– Funds holding more than 10% of their net assets in cryptocurrency require prior consultation with the SFC for management opinions.
Hong Kong Embracing Web3:
It is understood that in October 2022, Hong Kong authorities issued a series of policy statements on cryptocurrencies, actively integrating with the global financial trend. In June of this year, the Hong Kong government officially launched a licensing regime for virtual asset trading platforms, allowing licensed exchanges to provide retail services to retail investors. Following the fraud case involving JPEX in September, the SFC promptly responded and officially started disclosing the status of virtual asset platform license applications to the public in late September, including lists of licensed platforms, platforms that have applied for licenses, and closed platforms.
Further reading:
Hong Kong SFC Releases List of 9 “Suspected Cryptocurrency Exchanges,” JPEX Victim Amount Rises to HKD 1.61 billion
In addition, Laura Cha, Chairman of the SFC, revealed as early as November last year that regulatory authorities were evaluating cryptocurrency spot ETFs. Currently, Hong Kong has listed several cryptocurrency futures ETFs, such as Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF.
Finally, regarding the SFC and HKMA’s open attitude towards spot ETFs, Jason Chan, Partner at Howse Williams law firm in Hong Kong, commented:
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Related Reports:
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Tags:
ETF
Cryptocurrency
Spot ETF
Regulation
Hong Kong