With regard to custody agreements, the SFC emphasizes that the fund’s trustee or custodian may only delegate cryptocurrency custody functions to SFC-licensed VATTPs or institutions that meet the cryptocurrency custody standards set by the HKMA.
Hong Kong announced that it is ready to accept applications from traditional financial firms interested in exploring emerging economies by creating exchange-traded funds (ETFs) tracking spot-based cryptocurrencies.
The country already allows futures-based cryptocurrency ETFs and has approved exchange-traded ETFs such as Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures.
Crypto-friendly countries are now ready to open their borders to welcome spot ETFs for retail investors.
Hong Kong Cryptocurrency Spot ETF Ready
China’s financial regulators, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) shared the news in a joint circular published on Friday.
The Asian country has successfully reviewed its “professional investors only” rules enacted in 2018 to accommodate a wider range of investment options for retail investors, including digital assets, according to the financial watchdog.
“This policy has been updated in light of the latest market developments, with the SFC approving the VA Futures ETF and prepared to accept applications for approval from other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds (VAs). spot ETF),” reads the joint statement.
The regulator said it had seen an increase in requests from brokers regarding the potential distribution of investment products with exposure to virtual assets.
However, with a recent update, these companies can now submit applications to offer spot Bitcoin (BTC), Ethereum (ETH) or other digital asset funds for retail investors.
Hong Kong imposes strict guidelines on cryptocurrency spot ETFs
In a separate circular, the SFC outlined its criteria for approval of cryptocurrency spot ETFs and detailed the requirements for financial regulators to consider.
According to the statement, in order to offer such investment products to clients, companies must ensure that funds comply with the Key Principles section and relevant provisions of the Code. These rules are set out in the Unit Trusts and Mutual Funds (UT Code) within the SFC Handbook, which covers unit trusts, mutual funds, investment-linked guarantee schemes and unlisted structured investment products.
Additionally, SFC-approved VA fund management companies must demonstrate a strong track record of regulatory compliance before offering cryptocurrency spot ETFs.
Additionally, there must be at least one competent employee with experience managing virtual assets or related products. These companies are subject to additional terms and conditions imposed by the Licensing Department, as applicable.
The circular states that cryptocurrency transactions conducted by these ETFs must take place on SFC-licensed cryptocurrency platforms or approved financial institutions.
With regard to custody agreements, the SFC emphasizes that the fund’s trustee or custodian may only delegate cryptocurrency custody functions to SFC-licensed VATTPs or institutions that meet the cryptocurrency custody standards set by the HKMA.
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