Hong Kong Set to Launch Spot Crypto ETFs Amid Regulatory Shift

Reflective ETF imag with scryptocurrencies and the city of Hong Kong in the background

Hong Kong is emerging as a potential crypto hub in Asia, with approximately ten fund companies preparing to introduce virtual asset spot exchange-traded funds (ETFs), according to insights from HashKey Group, a local digital asset management firm. These spot crypto ETFs offer investors a means to gain exposure to virtual assets without the need to directly acquire any cryptocurrency tokens.

 10 Fund Companies are Preparing for Crypto Spot ETFs

Hong Kong is poised to become a leading crypto hub in Asia as about ten fund companies are gearing up to launch virtual asset spot exchange-traded funds (ETFs) in the city, according to HashKey Group, a local digital asset management firm. Spot crypto ETFs allow investors to gain exposure to virtual assets without directly buying any crypto tokens.

The move follows a joint circular issued by the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) in December 2023, signaling their openness to consider applications for the authorization of spot crypto ETFs. Previously, Hong Kong only allowed retail participation in crypto futures ETFs, which hold virtual-asset futures contracts, instead of direct investments in crypto tokens at their spot prices.

Rebuilding Investors’ Confidence in Virtual Assets

Livio Weng, chief operating officer of HashKey Group, said that “about 10 fund companies” are already in the actual advancement stage of launching spot crypto ETFs, and it is expected that it will take at least three to six months for a fund to be officially listed. He added that the SFC has been very supportive and cooperative in the process.

The development reflects Hong Kong’s determination to rebuild investors’ confidence in virtual assets, following a number of major financial scandals involving cryptocurrencies, such as the collapse of crypto exchange FTX in November 2022 and the fraud cases of Hounax and JPEX in the city.

Willingness to Approve

The SFC and the HKMA said in their circular that they recognize the rapid evolution of the virtual asset landscape and its integration into mainstream finance, and that they are prepared to authorize funds with direct exposure to virtual assets, including spot crypto ETFs. They also said that they will impose certain requirements and restrictions on such funds, such as limiting the types of eligible virtual assets, imposing concentration limits, and requiring enhanced disclosures and risk warnings.

A Leader in the Global Crypto Landscape

Hong Kong’s initiative puts it in a leading position in the global crypto landscape, as it is one of the few jurisdictions that allow retail access to spot crypto ETFs. The US Securities and Exchange Commission (SEC), on Wednesday approved spot Bitcoin ETFs after years of rejection. The SEC has only previously approved several futures-based crypto ETFs, which are considered less efficient and more costly than spot crypto ETFs.

Spot crypto ETFs are seen by the crypto industry as important vehicles for virtual assets to become more attractive to mainstream investors, as they offer a regulated and accessible way to gain exposure to the crypto market. They also adhere to crucial factors such as legal, regulatory and compliance standards, which are essential for investor protection and market integrity.

Author: Grace

Grace likes gardening. She holds some BTC and ETH.