Hong Kong regulators have laid the groundwork for cryptocurrency spot exchange-traded funds (ETFs), a move that could attract crypto investment amid the current market volatility.
- The Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) jointly issued guidelines for crypto spot ETFs
- Previously, only crypto futures ETFs were permitted, but spot ETFs will now be evaluated on a case-by-case basis
- Interest in crypto investments has grown rapidly, influencing Hong Kong’s shift from a “professional-only” to broader investor access framework
- Funds can invest directly in spot Virtual Asset (VA) tokens through SFC-licensed trading platforms and authorized institutions
- Crypto exposure over 10% of fund assets require consultation with the SFC
The guidelines, outlined in SFC Circular 23EC67 and 23EC65, allow in-kind and in-cash subscription/redemption methods for spot ETFs. Custody accounts of authorized providers must be used for cryptocurrency storage.
To determine the net asset value of spot crypto ETFs, an indexing approach based on major exchange trade volume data is recommended. Spot ETFs must be thoroughly evaluated before approval.
Positioning Hong Kong as a Financial Hub
Hong Kong has emerged as a major blockchain investment center, attracting over 11% of global venture capital funding. The issues faced by FTX crypto exchange have channeled more funds to Hong Kong and Singapore. Permissive crypto policies and a licensing system aim to position Hong Kong alongside other leading financial hubs.
Eyeing Future Approval of U.S. Spot Bitcoin ETF
The U.S. Securities and Exchange Commission (SEC) may approve a spot bitcoin ETF in the near future, following the introduction of futures-based bitcoin ETFs in the U.S. earlier this year.