In a move signalling Hong Kong’s growing embrace of the cryptocurrency industry, Venture Smart Financial Holdings (VSFG), a local financial services firm, is on track to introduce a spot Bitcoin exchange-traded fund (ETF) in the first quarter of 2024. This development comes in the wake of the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority’s joint announcement of their readiness to accept applications for spot cryptocurrency ETFs, a report by Bloomberg said.
According to the news report, Brian Chan, VSFG’s Group Head of Investment and Product, expressed optimism about the enormous potential in the Bitcoin market. The firm aims to achieve $500 million in assets under management by the end of this year. To facilitate the launch, VSFG is actively working on its application with the SFC.
This initiative follows the SFC’s official statement in December 2023, opening the door for authorized and licensed institutions in Hong Kong to submit applications for spot Bitcoin ETFs. Anticipating this regulatory shift, at least 10 fund managers in the region have been gearing up to launch cryptocurrency-based ETFs.
RJ Ke, a researcher with Ethereum scaling startup Taiko, suggests that the successful launch of spot Bitcoin ETFs in the United States on January 11 may expedite similar applications in Hong Kong. While companies like Samsung Asset Management, known for offering futures-based crypto ETFs in Hong Kong, have not ruled out the possibility of exploring spot ETFs, VSFG remains a key player, aiming for a Q1 2024 launch.
Earlier, SuperCryptoNews in December 2023 reported that the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority jointly announced their preparedness to accept applications for spot cryptocurrency exchange-traded funds (ETFs). This announcement followed a thorough review of existing policies related to intermediaries engaged in virtual asset activities.
The regulatory authorities expanded the existing framework for cryptocurrency futures ETFs, expressing their willingness to authorize funds with exposure to virtual assets, including virtual asset spot exchange-traded funds (VA spot ETFs). Notably, the SFC outlined specific requirements for funds seeking to invest directly in spot virtual assets, ensuring transactions are conducted through licensed crypto platforms or authorized financial institutions.
The circular emphasizes the permissibility of both in-kind and in-cash subscription and redemption mechanisms for SFC-authorized spot VA ETFs. Regarding crypto asset custody, trustees or custodians must exclusively delegate their function to SFC-licensed virtual asset trading platforms or entities adhering to crypto custody standards issued by the Hong Kong Monetary Authority.
The valuation of spot virtual assets is expected to adopt an indexing approach based on trade volume across major virtual asset trading platforms. Additionally, funds with crypto exposure exceeding 10% of their net asset value must undergo prior consultation with the SFC.
This regulatory development follows a series of policy statements aimed at strengthening Hong Kong’s position as a global financial centre, with the city initiating its crypto licensing regime for virtual asset trading platforms in June 2022.
Julia Leung, Chief Executive Officer of Hong Kong’s SFC, emphasized the regulator’s interest in assessing spot crypto ETFs, recognizing the importance of innovative technology in enhancing efficiency and customer experience.
Hong Kong has already listed several futures-based crypto ETFs, including the Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF.
