Hong Kong begins accepting applications for virtual currency spot ETFs

11 months ago 43

Bitcoin spot ETF also accepting applications

The Hong Kong Securities and Futures Commission (SFC) announced on the 22nd that it is ready to accept applications for a physical crypto asset (virtual currency) ETF.

This was stated in a circular informing the SFC and the Hong Kong Monetary Authority (HKMA) of their new policy for intermediaries engaged in crypto-related activities. The SFC explains:

We have updated our policy to take into account the latest market developments, including the SFC’s approval of virtual currency futures ETFs.

We are ready to accept applications for approval from other funds with exposure to cryptocurrencies, including spot cryptocurrency exchange-traded funds (cryptocurrency spot ETFs).

Expectations are high in the United States that the U.S. Securities and Exchange Commission (SEC) will soon approve a spot ETF for the virtual currency Bitcoin (BTC). Meanwhile, with Hong Kong also starting accepting applications, it will be interesting to see which market will approve spot ETFs first.

To date, the SEC has rejected all Bitcoin spot ETFs, but companies currently applying have put mechanisms in place to alleviate the SEC’s concerns.

If approved, there are voices predicting an increase in capital inflows into Bitcoin, with some saying that companies may invest in Bitcoin spot ETFs with their corporate defined contribution pension plans (401k). There is also.

connection: “Bitcoin spot ETF may receive inflows from US corporate pension funds” CNBC reports expert opinion

What is Bitcoin ETF?

An Exchange Traded Fund that includes Bitcoin as an investment. An investment trust is a financial product that collects money from investors into a single fund and invests it in stocks, bonds, etc. The system is such that the investment results are distributed according to each investor’s investment amount. Among investment trusts, ETFs are listed on stock exchanges, so they can be bought and sold like stocks.

Virtual currency glossary

connection:
Learn about Bitcoin ETFs from the beginning: Explaining the advantages and disadvantages of investing and how to buy US stocks

Bitcoin ETF special feature

Virtual currency fund requirements

The Hong Kong Securities and Futures Commission (SFC) published requirements for crypto-related funds in a separate circular issued on the 22nd.

First, regarding stocks, it stipulates that virtual currency-related funds approved by the SFC must only invest in tokens that Hong Kong residents can trade on virtual currency trading platforms approved by the SFC.

Regarding custody, the fund administrator will only entrust custody to a virtual currency trading platform that is approved by the SFC or meets the virtual currency custody standards set by the Hong Kong Monetary Authority (HKMA). said that it should be done.

It also states that an indexing approach based on trading volumes on several major virtual currency trading platforms should be adopted for evaluating the value of physical virtual currencies.

Additionally, SFC-licensed crypto fund managers must employ at least one qualified staff member with a strong track record of regulatory compliance and experience managing such products.

The SFC explains the background to this rule revision as follows:

Globally, the crypto landscape is rapidly evolving, and a wider range of investment products offering exposure to cryptocurrencies, such as crypto-related ETFs offered in overseas markets, are becoming more widely available to individual investors. It is offered to both professional investors.

Demand for these products is also increasing in Hong Kong.

From October 2022, SFC will begin accepting applications for ETFs that have exposure primarily to virtual currencies. In June of this year, it also launched a licensing system for virtual currency trading platforms.

connection: Hong Kong will implement new rules for virtual currency exchanges from June, stipulating stocks that can be listed, etc.