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FameEX Hot Topics | Hong Kong Regulatory Authority Set to Greenlight In-Kind Spot Bitcoin ETFs
2023-12-28 16:29:20
Hong Kong’s financial regulator is advancing its approach to regulating spot bitcoin exchange-traded funds (ETFs), distinguishing itself from the U.S. Securities and Exchange Commission (SEC). The Hong Kong Securities and Futures Commission (SFC) issued a circular on December 22, outlining guidelines for “authorized funds with exposure to virtual assets.” This move sets a foundation for authorizing investment funds with more than 10% exposure to virtual assets (VAs) for public offerings in Hong Kong.
The SFC’s decision comes in response to the rapidly evolving virtual asset landscape and the growing popularity of investment products like crypto ETFs among both retail and professional investors. The Hong Kong regulator is acknowledging the increased demand for such products locally and is introducing regulatory frameworks to offer VA products to the public, ensuring appropriate investor protection measures are in place.
In October of the previous year, the SFC began accepting applications for ETFs primarily investing in crypto assets through futures contracts. By June 2023, the SFC’s licensing regime for virtual asset trading platforms (VATPs) was operational, granting Hong Kong investors direct access to major spot virtual assets, contingent upon eligibility and strong investor protection measures. The SFC stipulates that spot crypto transactions and acquisitions by SFC-authorized funds must be executed via SFC-licensed crypto trading platforms or authorized financial institutions. This requirement aligns with the regulatory standards set by the Hong Kong Monetary Authority (HKMA). In contrast to the U.S., where the SEC is focused on the cash creation model for spot bitcoin ETFs, Hong Kong is adopting a more versatile approach by allowing both cash and in-kind creation models for these ETFs. This divergence underscores Hong Kong’s proactive stance in embracing the dynamic world of cryptocurrency investments. The U.S. SEC, meanwhile, has set a tight deadline for spot bitcoin ETF applicants to update their filings for consideration in the early January decision batch. This regulatory posture reflects the SEC’s cautious approach to cryptocurrency ETFs, particularly regarding their impact on the broader financial markets. Hong Kong's move to introduce regulations for spot bitcoin ETFs demonstrates the city's commitment to fostering a progressive and regulated cryptocurrency market. By accommodating both cash and in-kind creation models, Hong Kong is positioning itself as a leading financial hub in the world of digital assets, offering a regulated pathway for investors to engage with cryptocurrencies. This development marks a significant step in the evolution of cryptocurrency regulations and could influence other jurisdictions' approaches to digital asset ETFs. Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.
