Hong Kong Securities and Futures Commission: Ready to accept applications for virtual asset spot ETFs

On December 22nd, the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) updated their joint circular on virtual asset-related activities of intermediaries. The circular states that in response to recent market developments, including the SFC's approval of virtual asset futures exchange-traded funds (ETFs) and readiness to accept applications for other funds involving virtual assets such as spot trading ETFs, both regulatory bodies have made updates to relevant policies. The updates clearly specify the regulations applicable to intermediaries when distributing virtual asset-related products, as well as the conduct standards that intermediaries should meet when distributing virtual asset funds approved by the SFC.

In addition, the SFC also issued a circular regarding its recognition of funds investing in virtual assets. It stipulates that these funds must "directly invest in spot virtual asset tokens tradable on a licensed virtual asset trading platform (VATP) accessible by members of the public in Hong Kong." Cryptocurrency transactions conducted by such ETFs should be carried out through cryptocurrency platforms licensed by the SFC or authorized financial institutions. The custodian function for their cryptocurrencies can only be entrusted to VATPs licensed by the SFC or institutions complying with cryptocurrency custody standards set forth by HKMA. Approved spot cryptocurrency ETFs are allowed to be subscribed and redeemed using either physical or cash methods.