HK SFC Bitcoin ETF Regulation

HK Fintech Week: SFC Reviews Crypto Regulation, Allows Hong Kong Bitcoin ETF?

HK SFC Bitcoin ETF Regulation
At the Hong Kong Fintech Week, Hong Kong regulator SFC announced its plan to review the city’s cryptocurrency regulatory framework. Also, SFC has received multiple applications from institutions to launch crypto ETFs for Hong Kong investors.

The listing of the first Bitcoin ETF (BITO) has boosted institutions’ interest in crypto investments. Julia Leung, SFC’s deputy chief executive of the Securities and Futures Commission (SFC) said the securities regulator is overwhelmed by institutions. It has received a number of ETF applications from local institutions. And they plan to launch crypto ETFs targeting private banking clients and professional investors.

However, the SFC is still evaluating the regulatory issues of crypto ETFs. For now, Hong Kong’s regulatory framework allows only professional investors to buy and sell crypto. Therefore, the securities regulator is looking into whether Hong Kong’s crypto ETFs are open to all retail investors.

Currently, Hong Kong retail investors can trade Grayscale Bitcoin Trust (GBTC) via online brokerages in the secondary market. GBTC, launched by Digital Currency Group’s Grayscale, is one of the most popular Bitcoin-linked investment products.

Earlier, the Hong Kong government introduced the virtual currency regulatory framework and licensing system. It requires centralized crypto exchanges to limit their services to only professional investors – with liquid assets of HK$8 million – or companies with assets of more than US$5 million. Exchanges including FTX and OSL have cooperated with new regulations. However, many Hong Kong retail investors have not been able to get crypto trading services from exchanges.

SEC Reviews HK Crypto Exchange Regulations This Year

Is the Hong Kong SFC changing its crypto regulation approach? “Bitcoins do not fit into the definition of securities or fund. And therefore, Bitcoins fall outside the perimeter in most jurisdictions,” Liang noted.

According to Liang, the SFC is reevaluating Hong Kong’s virtual asset regulatory framework. The securities regulator is having a discussion with the Hong Kong Monetary Authority (HKMA), and will announce its decision as soon as the end of the year.

Amid the digital currency boom, HKMA’s former chief is accelerating the development of his new digital currency, Round Dollar. Norman Chan revealed his startup is set to launch Round Dollar in mid-2022. The digital currency and wallet are targeting commercial B2B payments and remittance.

Meanwhile, Hong Kong is actively exploring a central bank digital currency (CBDC) for retail use. According to Financial Secretary Paul Chan, the government explores issuing e-HKD to the public for retail payments. Considering Hong Kong’s consumption voucher scheme, the retail e-HKD has likely to do with the cash handout schemes in the future.

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