Hong Kong is Considering Allowing Spot Crypto ETFs, SFC Head Reveals

Hong Kong is considering allowing spot exchange-traded funds (ETFs) that directly invest in cryptocurrencies.

Julia Leung, Chief Executive Officer of the Securities and Futures Commission (SFC), revealed that the option of granting retail investors access to spot crypto ETFs is under consideration, subject to addressing regulatory concerns effectively.

In a recent interview with Bloomberg, Leung emphasized the SFC’s openness to embracing innovative technologies that enhance efficiency and customer experience while managing potential risks.

Race to Launch Crypto Spot ETFs

Crypto ETFs are seen as a way to bring digital assets to a wider range of investors, potentially making them more mainstream.

The surge in Bitcoin’s value this year, up 110%, is partially attributed to expectations that major financial institutions like BlackRock Inc. may soon receive approval to launch the first spot ETFs in the United States.

Presently, both Hong Kong and the United States allow futures-based crypto ETFs, with relatively modest adoption compared to the broader fund industry.

In Hong Kong, several ETFs, such as Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures, are currently listed, with combined assets totaling approximately $65 million.

SFC Head Highlights Need for a Robust Regulatory Framework

Leung stressed the need for a robust and comprehensive regulatory framework for the crypto industry in light of the JPEX incident. The SFC has increased transparency in the application process for virtual asset exchange licenses.

Under the SFC’s digital asset regulations, retail investors can trade major tokens like Bitcoin and Ether on licensed exchanges.

Currently, BC Technology Group Ltd.’s OSL and HashKey Exchange are the only platforms with Hong Kong crypto permits, and mandatory rules for stablecoins are anticipated by 2023-2024.

As reported earlier, Hong Kong officials are exploring tokenization, which involves creating digital representations of real-world assets using blockchain technology.

Regulatory guidance released by the SFC recently opens the door for tokenized products for retail investors. Leung expects experimentation with various levels of tokenization in the initial stages.