The Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) issued a joint circular yesterday titled “Joint Circular on Intermediaries’ Activities in Virtual Asset-related Activities”. The circular states that after reviewing the existing regulatory policies for intermediaries engaging in virtual asset-related activities, the SFC and HKMA have decided to accept applications for authorization of “other funds involving virtual assets”, in addition to the existing cryptocurrency futures exchange-traded funds (ETFs), including cryptocurrency spot ETFs.
In regards to the regulatory requirements for spot ETFs, the SFC has outlined the following:
1. Virtual asset transactions involved in spot ETFs should be conducted through virtual asset trading platforms (VATPs) licensed by the SFC or authorized financial institutions.
2. Such ETFs allow for subscriptions and redemptions in cash or in-kind.
3. The custody services provider for the fund can only entrust custody to VATPs licensed by the SFC or financial institutions that comply with the HKMA’s standards for cryptocurrency custody.
4. Fund management companies should adopt an index-based approach to calculate the trading volume of virtual assets based on the primary trading platforms.
5. Funds holding more than 10% of their net assets in cryptocurrencies should seek prior consultation with the SFC for management opinions.
Hong Kong’s embrace of Web3
It is understood that in October 2022, the Hong Kong authorities issued a series of policy statements on cryptocurrencies, actively integrating into the global financial trend. In June of this year, the Hong Kong government officially launched the licensing regime for virtual asset trading platforms, allowing licensed exchanges to provide retail services to retail investors. After the fraud case involving the exchange JPEX in September, the SFC quickly responded by officially disclosing the relevant lists of virtual asset platform license applications to the public at the end of September, including licensed platform lists, applied-for license platforms, and closed platforms.
In addition, Laura Cha, the Chairperson of the SFC, had previously revealed in November last year that the regulatory authorities were evaluating cryptocurrency spot ETFs. Currently, Hong Kong has already listed several cryptocurrency futures ETFs, such as the Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF.
Regarding the SFC and HKMA’s open attitude towards spot ETFs, Jason Chan, a partner at Howse Williams law firm in Hong Kong, stated:
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– Chen Lingjiu admits to being too unlucky and “becomes vegetarian for better luck”, JPEX Hong Kong involved amount exceeds TWD 6.5 billion
– Former Hong Kong Monetary Authority CEO advocates for “Hong Kong Stablecoin”! Chen Delin calls for testing before legislating and regulating
Tags:
ETF
Cryptocurrency
Spot ETF
Regulation
Hong Kong