Hong Kong ‘Actively Looking’ to Establish Regulatory Framework to Allow Crypto Futures ETFs

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Hong Kong’s Securities and Futures Commission (SFC) is “actively looking” to create a regulatory framework that allows crypto futures exchange-traded funds (ETFs), an SFC official reportedly said. “We have come to believe that some initial concerns about virtual asset futures ETFs have become manageable and can be addressed with proper safeguards.”

Rising Demand for Crypto ETFs in Hong Kong

Hong Kong’s top financial regulator is “actively looking” to set up a regulatory framework that allows retail investors to trade exchange-traded funds (ETFs) with exposure to cryptocurrency futures, Ignites Asia reported Monday. The publication cited Julia Leung, deputy chief executive officer and executive director for the Intermediaries Division at the Securities and Futures Commission (SFC).

Leung reportedly said last week during her keynote speech at Hong Kong Fintech Week that the SFC is “actively looking to set up a regime to authorize ETFs that provide mainstream virtual assets with appropriate investor guardrails.”

She explained that initially, the Securities and Futures Commission will only allow ETFs that invest in bitcoin futures and ether futures traded on the Chicago Mercantile Exchange (CME) exchange.

The SFC published a circular on Oct. 31 outlining the requirements under which it “would consider authorizing exchange-traded funds (ETFs) that obtain exposure to virtual assets (VAs) primarily through futures contracts (VA Futures ETFs) for public offering in Hong Kong,” the regulator detailed, elaborating:

A broad range and larger number of investment products providing exposure to VAs, including VA-related ETFs offered in various markets globally, are now available to both retail and professional investors and have become increasingly popular. Similarly, demand for such products has increased in Hong Kong.

The circular further states that the SFC “is prepared to accept applications for authorization of VA Futures ETFs.”

A regulatory framework for crypto assets was first issued in November 2018 restricting access to professional investors. Defending the decision to disallow retail investors to trade crypto, Leung said: “Given the novelty of our framework and the high volatility of crypto assets, we believed it was prudent to impose an overarching ‘professional investor’ restriction.”

However, the executive director emphasized that Hong Kong’s crypto ecosystem had made “substantial advancement” in the past four years. During this time, the SFC had gained more experience in regulating crypto trading platforms and fund firms, she detailed, elaborating:

We have come to believe that some initial concerns about virtual asset futures ETFs have become manageable and can be addressed with proper safeguards.

“It is now an opportune time to review the ‘professional investor only’ requirement,” she added, emphasizing that the SFC is preparing to adjust its “regulatory response and allow retail access” to security token offerings with certain safeguards in place.


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