The race to list the first Bitcoin spot ETF in Hong Kong has already started. As per local reports, the Securities and Futures Commission (SFC) of Hong Kong has received the first application for a Bitcoin spot ETF listing. Meanwhile, a total of 10 financial firms hailing from the region are expected to follow suit.
SFC recently confirmed the first Bitcoin spot ETF application only a few weeks after the approval of Bitcoin spot ETFs in the United States. Tencent News has identified the filer as Harvest Hong Kong, one of the biggest fund management firms in China. The article also suggested that SFC officials are looking to accelerate the legislative process for the approval of ETFs.
On this account, the regulators are aiming to approve the first spot ETF listing before the Chinese New Year on 10th February. Analysts opined that Hong Kong regulators may implement the same regulatory approach as the Securities and Exchange report identified various regional firms such as Venture Smart Financial Holdings Group (VSFG) and Samsung Asset Management to participate in the race.
In 2022, SFC passed a bill allowing retail investors to directly invest in digital currencies. In March 2023, Hong Kong’s secretary for Financial Services and Treasury, Christian Hui noted that around 80 digital asset services providers have expressed interest in opening offices in Hong Kong.
Hong Kong Regulators Show Support for Bitcoin ETF Listings
Monetary Authority of Hong Kong (HKMA) and SFC issued a joint statement in 2023 noting that the Central Bank and regulatory agency are reviewing policies for virtual asset intermediaries. SFC published a notification on 22nd December, 2023 to introduce the requirements for direct investment in identical tokens accessible to local crypto investors at SFC-regulated Virtual Asset Trading Platforms (VATPs).
The notification mandated 10% indexing implementation for fund managers issuing for virtual asset transactions at all VATPs. It means that spot ETF issuers are required to report 10% of their net asset holdings with SFC officials.
In June, 2023 HKMA issued an inquiry for major banking institutions such as Standard Chartered, HSBC, and Bank of China about declining crypto trading platforms as customers. On 27th April, HKMA sent a notification to banking institutions under its purview to encourage them to adopt an innovative approach towards VA firms and introduce policies to support the development of the sector.
In the same vein, SFC opened the floor for public comment on 20th February, 2023 about a licensing framework for all regulated VATPs operating in Hong Kong.
SFC Allows Retail Investors to Trade Highly Liquid Virtual Currencies
Last year, SFC CEO Julia Leung Fung-Yee told the media that the regulatory agency intends to only allow highly liquid assets accessible to retail traders. She was speaking at the Asia Financial Forum when she noted that various digital currency trading platforms are offering thousands of cryptocurrency products.
However, the executive retained that SFC officials do not plan to allow retail investors to seek exposure in all listed options by setting up criteria that will concentrate retail investment interest in major virtual currencies.
On 5th January 2023 Wu Jiezhuang a member of the Legislative Council of Hong Kong’s Special Administrative Region proposed the idea of converting e-HKD into a stablecoin during an interview with China Blockchain News. On the other hand, regulators activated the travel rule for one-third of VATPs in Hong Kong on 1st Jan, 2024 excluding self-custody wallets.