SFC in Hong Kong has received numerous requests for cryptocurrency exchange-traded funds.

November 3, 2021 - Around 2 mins mins to read

The Hong Kong Securities and Futures Commission (SFC) has received “a number” of requests in recent days from local companies seeking to offer crypto-related exchange-traded funds (ETFs) to their financial institution and professional clients, according to the SFC’s Deputy Chief Executive Officer & Executive Director Julia Leung.

Last year, Hong Kong’s Securities and Futures Commission (SFC) launched a regulatory framework specifically for cryptocurrency trading platforms; however, this was limited to platforms that traded an asset officially classified as a security or future, rather than just tokens like bitcoin.

“This is a significant limitation, as under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security,” Ashley Alder, chief executive of the SFC, said in a speech on Tuesday.

Speaking at Hong Kong Fintech Week this week, the SFC director provided a “glimpse” of the regulatory issues surrounding ETFs, including whether retail users should be allowed access to crypto ETFs through online brokers, and whether they should face additional restrictions in comparison to non-crypto ETFs.

She did not, however, provide any insight into the regulator’s decisions on ETFs.

The SFC is currently evaluating its crypto regulatory regime to see if it is still “fit for purpose,” according to Leung.

Virtual asset service providers must be licensed to operate in Hong Kong and can only provide services to professional investors, defined as individuals with a portfolio worth more than HK$8 million ($1 million) or companies with more than $5 million in total assets. SFC-regulated fund managers can invest up to 10% of their gross asset value in cryptocurrency, with the option of applying for a special license if they want to invest more.

Patrick

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