Key Takeaways
- Currently, both Hong Kong and the United States allow futures-based cryptocurrency ETFs
- Under the SFC’s digital asset regulations, retail investors can engage in trading major crypto on licensed exchanges
Regulatory authorities in Hong Kong are currently evaluating the feasibility of enabling retail investor access to spot ETFs investing in cryptocurrencies, with a focus on addressing regulatory concerns effectively.
Securities and Futures Commission Chief Executive Officer Julia Leung, in an interview with Bloomberg, affirmed the regulator’s strong interest in evaluating retail investment products employing innovative technology to enhance efficiency and customer experience.
In the present landscape, both Hong Kong and the United States allow futures-based cryptocurrency ETFs, which have seen modest adoption when compared to the broader fund industry.
Notably, Hong Kong already lists several ETFs, including Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures, collectively amassing around $65 million in assets.
Julia Leung stressed the need for establishing a comprehensive regulatory framework for the cryptocurrency industry, particularly in light of the JPEX incident. The SFC has been actively enhancing transparency in the application process for virtual asset exchange licenses.
Under the SFC’s digital asset regulations, retail investors can engage in trading major cryptocurrencies such as Bitcoin and Ether on licensed exchanges.
Leung’s comments follow the recent update of the SFC’s guidance on virtual asset-related activities for intermediaries, expanding the scope of investors who can participate in cryptocurrency ETFs.
The regulator introduced a requirement for intermediaries to assess their clients’ knowledge of virtual assets before executing transactions. Notably, institutional professional investors and qualified corporate professional investors are exempt from this knowledge test.
In terms of platforms with cryptocurrency permits, BC Technology Group Ltd.’s OSL and HashKey Exchange are the exclusive entities in Hong Kong.
Additionally, mandatory rules for stablecoins are expected by 2023-2024. Furthermore, Hong Kong officials are actively exploring tokenization, which entails creating digital representations of real-world assets using blockchain technology.
Recent regulatory guidance from the SFC has opened doors for tokenized products targeted at retail investors, with Julia Leung anticipating experimentation in the initial stages.
In June, Hong Kong formally launched its cryptocurrency licensing regime for virtual asset trading platforms, granting licensed exchanges the authority to offer retail trading services.
