Hong Kong regulator starts accepting applications for spot crypto ETFs

What’s new? The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) have updated their policies on cryptocurrency-based investment products. Currently, trading on licensed crypto exchanges for retail investors and cryptocurrency futures exchange-traded funds (ETFs) are already permitted in the PRC special administrative region. In addition, regulators have indicated their willingness to accept applications to launch spot cryptocurrency ETFs.

Press release

What else is known? However, officials noted that spot ETFs may carry risks for retail investors due to the opaque pricing mechanism and the possibility of market manipulation. Due to these circumstances, only SFC-licensed companies will be able to offer such products, and some of them may only be accessible to qualified investors, or with proper risk communication.

The possibility of allowing spot crypto ETFs on the Hong Kong market became known in early November. Then the head of the SFC Julia Leung said that the agency welcomes innovative technologies that improve the efficiency and quality of customer service.

In September, Forex Suggest analysts put Hong Kong at the top of the ranking of jurisdictions ready for the introduction of cryptocurrencies. Earlier this year, local authorities announced their intention to turn the city into a regional crypto hub and adopt their own laws on crypto regulation, different from mainland China, where cryptocurrencies and mining have been banned since 2021.

In September, the first spot crypto ETF was launched in Europe. The bitcoin fund from Jacobi Asset Management is traded on Euronext Amsterdam under the ticker BCOIN.

Only futures ETFs are allowed in the US, although more than a dozen investment companies have applied to launch spot ETFs since April of this year. Securities regulator SEC has repeatedly postponed the deadlines for making decisions on them, citing the incompleteness of the documents, and in particular, the lack of information in them on mechanisms to protect investors from market manipulation. Over time, the companies have supplemented their filings in response to the officials’ comments.

CNBC, citing sources, writes that the SEC may approve spot BTC ETFs as early as January 10 next year: that is when the deadline for a decision on the joint application of ARK Invest and 21Shares comes.