Hong Kong SFC under pressure to authorize crypto ETFs

Hong Kong

TL; DR Breakdown

  • Hong Kong Securities and Futures Commission (SFC) is under pressure to give a nod on ETFs.
  • The SFC is evaluating its crypto rules, and it will provide a review in due time.

Hong Kong Securities and Futures Commission (SFC) is being strained by companies intending to offer ETF crypto-related exchange-traded funds. Julia Leung, Deputy Chief Executive Officer at SFC, said that various companies have inquired about establishing a digital currency ETF to cater to their executive clients. 

However, the director seemed hesitant with the governance of ETFs. The agency has not confirmed whether they will authorize ETFs.

The regulatory firm is unsure how to handle the retail users and how they will access the ETFs. The financial regulator is now focused on evaluating its 2018 crypto regulations, including the options of retail customers concerning ETFs. They want to determine if the rules are still usable or some modifications are needed. Cryptocurrencies and tokens have been rising since the SFC established crypto regulations. From 2018 the value of bitcoin has climbed sixfold.

Even though Hong Kong allows the trading of cryptocurrencies, the city has not authorized ETFs. However, its scope of transactions is undergoing some inspections. Leung said a review is necessary because virtual assets are becoming a global mainstream financial investment noting that the virtual asset investment products keep evolving. She added that common exchanges around the globe had embraced cryptocurrency ETFs.

First bitcoin futures ETF in the U.S

A few weeks ago, the U.S. Securities and Exchange Commission approved the first bitcoin futures ETF. The U.S agency has received about 15 applications this year to launch these funds.

Under the present SFA rules, crypto service providers have to be licensed to operate in Hong Kong. Moreover, they are limited to serving high-class investors. These pros should have a portfolio of over HK$8 million ($1 million) or institutions holding total assets exceeding $5 million.

Recently an official for SFC said the city needs more measures to deal with cryptocurrency fraud. Deputy chief executive Liang Fengyi noted that in unlicensed trading, the SFC could alter the crypto scope. 

Fengyi further noted that virtual assets fall outside SFC power. They are not perceived as securities or payment methods. Thus, investors who have participated in the sector have suffered losses.

Hong Kong and cryptocurrency limitations

The Financial Services and the Treasury Bureau of Hong Kong could place more measures soon. The platform intends to regulate crypto access to only those with at least $1 million holdings. The rules could restrict about 90 % of the city’s population from accessing crypto.

Several crypto exchanges in Hong Kong have faced limitations in trading. Infact some firms like Futu halted their trading activity because of regulatory issues. Binance followed a few months later, moving to block derivatives trading for Hongkongers.

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Edith Muthoni

Edith Muthoni

Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, cryptocurrencies, blockchain, and cryptocurrency investments.

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