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 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. Julia Leung (deputy chief executive officer and executive vice-director for the Intermediaries Division of the Securities and Futures Commission) was cited in the publication.
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 said that the Securities and Futures Commission initially will not allow ETFs to invest in bitcoin futures or ether futures trading on the Chicago Mercantile 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:
There are now a wider range of products that offer exposure to VAs. These include VA-related ETFs in different markets around the world. This has made them more popular among professional and retail investors. Similar products are also in high demand in Hong Kong.
The circular further states that the SFC “is prepared to accept applications for authorization of VA Futures ETFs.”
The first regulatory framework regarding crypto assets was published in November 2018. It restricted the access of 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. The SFC gained more expertise in the regulation of crypto trading platforms, and firms that manage them, she explained.
We believe initial concerns regarding virtual asset futures ETFs can now be managed and addressed by 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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