Revolutionary Move in the Crypto World: Brand New Doors Are Opening for Spot ETFs!

Hong Kong's financial regulatory bodies, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), have announced a groundbreaking move in the crypto spot ETF space.

In a joint announcement today, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority, the city's de facto central bank, said both entities are reviewing their current policies toward brokers engaged in virtual-related activities.

The SFC stated that it is ready to receive applications for the authorization of various funds, including Virtual Spot exchange-traded funds (VA Spot ETFs), as well as existing crypto futures ETFs.

In another circular issued on Dec. 22, the Securities and Futures Commission outlines the criteria for funds to "directly invest in the same spot Virtual Asset (VA) tokens offered to the people of Hong Kong on SFC-licensed Virtual Asset Trading Platforms (VATPs)."

The SFC emphasized that cryptocurrency transactions carried out by these ETFs must take place through SFC-licensed crypto platforms or authorized financial institutions. The regulator added that in-kind and cash subscriptions and redemption are allowed for spot Virtual Asset (VA) ETFs authorized by the SFC.

Regarding custody, the SFC stated that the trustee or custodian of the fund must only delegate the crypto custody function to an SFC-licensed Virtual Custody Trading Platform (VATP) or those that meet the crypto custody standards set by the HKMA.

The regulator added that for spot virtual asset valuation, the fund's management companies "must adopt an indexation approach based on VA trading volume on major VA trading platforms." Funds that plan to have crypto exposure in excess of 10% of their net worth should consult with the SFC in advance, the circular said.

Hong Kong has been open to crypto firms this year and has actively encouraged cooperation with banks.

In October 2022, Hong Kong issued policy statements on cryptocurrencies to enhance its status as a global financial center.Koinfinans.com In June, the city launched the crypto licensing system for virtual trading platforms, enabling licensed exchanges to offer retail trading services.

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