Hong Kong Hedge Funds Queue Up for Spot Crypto ETFs
With Hong Kong on the verge of approving spot crypto ETFs, nearly a dozen hedge funds are preparing to submit applications for these financial products. The city is set to become the first market in Asia to allow the listing of spot crypto exchange-traded funds.
Livio Weng, COO of HashKey Group, revealed in an interview with Chinese news outlet Caixin that approximately 12 hedge funds are getting ready to apply for the launch of spot crypto ETFs in Hong Kong. While the timeline for regulatory approval remains uncertain, Weng mentioned that around eight of these hedge funds are already in the advanced stage of their applications.
Regulators Acknowledge Growing Interest in Spot Crypto ETFs
In December 2023, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) jointly issued a circular recognizing the increasing interest in spot crypto ETFs. The SFC expressed its readiness to accept applications for funds with exposure to cryptocurrencies, including spot crypto ETFs.
It’s important to note that Hong Kong has already granted permission for futures crypto ETFs, such as Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF. These ETFs are accessible to Hong Kong investors with portfolios exceeding $2 million through UBS’ local branch.
Cautious Stance on the Broader Crypto Market
While Hong Kong regulators show willingness to consider approving spot crypto ETFs, they remain cautious about the broader crypto market. In late December 2023, the Financial Services and the Treasury Bureau (FSTB) and the HKMA issued a joint statement allowing retail investors to purchase stablecoins.
However, stablecoin issuers must obtain a special HKMA license before offering their services in the region. The licensing requirements include measures like full backing of stablecoins with reserves matching their face value, proper segregation and custody of reserve assets, transparent disclosure practices, and regular reporting.
Stablecoin issuers seeking approval will also need to establish a physical presence in Hong Kong by opening an office with a CEO, senior management team, and key personnel to ensure compliance and effective oversight.
Hot Take: Hong Kong Leading the Way in Spot Crypto ETFs
Hong Kong’s potential approval of spot crypto ETFs positions the city as a trailblazer in Asia. With hedge funds lining up to submit applications, it demonstrates the growing interest and demand for these financial products. While regulatory approval timelines remain uncertain, Hong Kong’s readiness to consider spot crypto ETFs sets a positive precedent for other markets in the region.
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