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Hong Kong is preparing to open the door to spot crypto ETFs with a joint circular issued today. The Hong Kong Monetary Authority and the Securities and Futures Commission (SFC) announced that they are reviewing their policies for intermediaries who want to operate with virtual assets.
The SFC stated that it is ready to accept applications for the authorization of other funds exposed to virtual assets, including “virtual asset spot exchange-traded funds (VA spot ETFs)”, in addition to the existing crypto futures ETFs. In a separate circular, the SFC explained the requirements for funds to “invest directly in the same spot VA tokens accessible to the Hong Kong public on SFC licensed virtual asset trading platforms (VATPs)”.
The circular emphasized that crypto transactions should be carried out through SFC licensed crypto platforms or authorized financial institutions, and that “both in-kind and cash subscription and redemption are allowed for SFC approved spot VA ETFs”.
The SFC also set strict requirements for custody. It was stated that the fund’s trustee or custodian should only delegate the crypto custody function to an SFC licensed VATP or those meeting the crypto custody standards issued by the Hong Kong Monetary Authority. This step by Hong Kong can be considered as a move towards greater acceptance of cryptocurrencies within the financial order.