Hong Kong Regulators Prepare for Launch of Spot Cryptocurrency ETFs

Hong Kong's regulatory authorities, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), are getting ready to consider applications for the introduction of spot cryptocurrency exchange-traded funds (ETFs). They have recently updated their regulations and guidelines for companies and middlemen interested in entering the cryptocurrency market.

While Hong Kong already offers ETFs based on cryptocurrency futures, the SFC is now open to receiving applications for authorizing other funds that provide access to digital assets, including spot ETFs for virtual assets.

The SFC has outlined specific criteria for funds with direct investments in cryptocurrencies. These tokens must be available on regulated trading platforms in Hong Kong. Moreover, transactions conducted by spot funds must occur through licensed cryptocurrency platforms or authorized financial institutions. Cryptocurrencies must also be securely stored on licensed platforms or with companies meeting local standards for cryptocurrency custody services.

Before submitting applications for spot cryptocurrency ETFs, companies are required to consult with the regulator if their investments in digital assets exceed 10% of the total fund volume.

In early December, the Hong Kong regulator issued a decree mandating that all cryptocurrency firms operating within the city obtain a license from the regulator within a year. This marks a significant move toward regulating the cryptocurrency industry in Hong Kong.