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Hong Kong mulls on allowing retail investors to trade crypto futures ETF

Only exchange-traded funds that invest in Bitcoin (BTC) futures and Ether (ETH) futures will be allowed initially

Image by: Wikimedia Commons

Wed, 09 Nov 2022, 15:09 pm UTC

Hong Kong’s top regulator is mulling on the possibility of setting up a regulatory framework that will allow retail investors to trade ETFs with exposure to crypto futures. A Securities and Futures Commission official explained that while the regulator initially had concerns about crypto EFTs, that agency now believes that those concerns are now manageable.

The Securities and Futures Commission (SFC), Hong Kong’s top financial regulator, is “actively looking” to create a regulatory framework that would allow crypto EFTS, according to Bitcoin.com. Julia Leung, deputy chief executive officer and executive director for the Intermediaries Division at the SFC said during her keynote speech at Hong KongFintech Week that the regulator is “actively looking to set up a regime to authorize ETFs that provide mainstream virtual assets with appropriate investor guardrails.”

The executive revealed that the SFC will initially limit the type of crypto ETFs. Leung said that only exchange-traded funds that invest in Bitcoin (BTC) futures and Ether (ETH) futures will be allowed initially.

In a circular published on October 30, the SFC detailed some of the requirements for EFTs. These requirements need to be met before it “would consider authorizing exchange-traded funds (ETFs) that obtain exposure to virtual assets (VAs) primarily through futures contracts (VA Futures ETFs) for public offering in Hong Kong.”

“A broad range and larger number of investment products providing exposure to VAs, including VA-related ETFs offered in various markets globally, are now available to both retail and professional investors and have become increasingly popular. Similarly, demand for such products has increased in Hong Kong,” the SFC wrote in the circular. The SFC also confirmed that it is now ready to accept VA Futures ETF applications.

In November 2018, regulators restricted access to crypto assets to professional investors. “Given the novelty of our framework and the high volatility of crypto assets, we believed it was prudent to impose an overarching ‘professional investor’ restriction,” Leung explained.

Leung added that since then, Hong Kong’s crypto ecosystem had made “substantial advancement.” In addition, the SFC gained more experience in regulating crypto exchanges and other crypto firms.

“We have come to believe that some initial concerns about virtual asset futures ETFs have become manageable and can be addressed with proper safeguards,” she added. “It is now an opportune time to review the ‘professional investor only’ requirement.”

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