Hong Kong prepares for retail access to spot cryptocurrency exchange-traded funds, boosting city’s virtual-asset hub ambitions

December 28, 2023

By Sharan Kaur Phillora

Hong Kong is taking a major step forward by allowing retail access to spot cryptocurrency exchange-traded funds (ETFs), which marks a significant shift from the city’s earlier stance.

Here’s what we know:

Previously, Hong Kong only permitted retail participation in cryptocurrency futures ETFs. This new initiative by the Securities and Futures Commission (SFC) of Hong Kong, in partnership with the Hong Kong Monetary Authority, aims to introduce spot virtual asset ETFs to the mainstream market. These ETFs allow investors to invest in cryptocurrencies without directly purchasing them, appealing to institutional and retail investors wary of the volatile nature of direct cryptocurrency investments.

Spot cryptocurrency ETFs offer a unique combination of traditional investment structures with the dynamic world of virtual assets, making them more attractive to a broader audience. Neil Tan from Tsunami Advisors highlights that these ETFs are essentially Web3 assets in a Web2 wrapper, simplifying access to the crypto market for traditional investors. This development is seen as a strategic move to restore investor confidence in the virtual asset market, especially following financial scandals involving cryptocurrencies.

Hong Kong’s decision to embrace spot crypto ETFs aligns with its goal, announced last year, to become a global hub for virtual assets. The city has implemented a new regulatory framework for centralized exchanges, allowing licensed platforms to serve retail investors.

Only two companies have received licenses, with nine others awaiting application approvals. Globally, only a few markets, including Canada, Germany, and Switzerland, have permitted the operation of spot crypto ETFs. The growing interest in this investment avenue is evident as the US Securities and Exchange Commission is expected to decide on a spot Bitcoin ETF.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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