Hong Kong’s top financial regulator SFC shows willingness to allow retail players to gain access to spot crypto ETFs while ensuring that risks are addressed properly.
Hong Kong regulators are assessing whether they can allow retail investors to seek exposure to spot crypto ETFs that directly invest in crypto assets.
Julia Leung, the Chief Executive Officer of the Securities and Futures Commission said that the city is considering granting retail investors access to spot ETFs, contingent upon the satisfaction of regulatory requirements. Leung said:
“We welcome proposals using innovative technology that boosts efficiency and customer experience. We’re happy to give it a try as long as new risks are addressed. Our approach is consistent regardless of the asset.”
The cryptocurrency industry views ETFs as a means of increasing the acceptance of digital assets among a broader range of investors. Presently, both Hong Kong and the United States permit futures-based cryptocurrency ETFs. However, their adoption remains relatively less. In Hong Kong, the existing listings include the Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF, with a combined asset value of approximately $65 million.
In June, Hong Kong introduced a dedicated regulatory framework for virtual assets as part of its efforts to regain its position as a leading financial hub. These regulations would not only to attract companies but also to prioritize investor protection. This emphasis on safeguarding investors was highlighted by a recent alleged HK$1.6 billion ($204 million) fraud case involving the unlicensed JPEX crypto exchange in the city.
Julia Leung, the SFC’s Chief Executive Officer, emphasized that this incident underscores the necessity for a robust and comprehensive regulatory framework. She also mentioned that the SFC has increased transparency in the process of granting virtual asset exchange licenses.
Under the SFC’s digital asset regulations, retail investors have the opportunity to trade major cryptocurrencies such as Bitcoin and Ether on licensed exchanges.
Hong Kong SFC Working on Tokenized Securities
SFC authorities are actively considering tokenization, which involves the creation of digital representations for real-world assets. Hong Kong made its debut in the digital green bonds market in February, and the SFC recently revised its regulatory guidance to create opportunities for tokenized products accessible to retail investors.
“In our journey of gradual evolution within the crypto ecosystem, once we reach a level of comfort, we are prepared to expand access to a broader group of investors,” Leung stated in the interview on November 2.
The SFC’s recent circulars, also released on the same day, have laid out a blueprint for introducing tokenized funds and bonds to retail investors. Leung anticipates the initial exploration of various degrees of tokenization. Furthermore, a restriction on security token offerings, previously limited to professional investors, remains eliminated according to the latest circular.
The Hong Kong Monetary Authority, the city’s central bank, is actively examining the provision of guidance to banks regarding digital asset custodial services. These services will be a crucial component in the development of Hong Kong’s digital asset ecosystem.