- A spot crypto ETF tracks the prices of actual cryptocurrencies
- Hong Kong regulators aim to treat crypto assets progressively
- Crypto asset issuers will have to publish risk disclosure statements
Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), is considering allowing retail investors to purchase spot crypto Exchange Traded Funds (ETFs), Bloomberg wrote.
Exposure to underlying crypto assets, but not without risk
A spot crypto ETF is an investment fund that tracks the prices of actual cryptocurrencies like Bitcoin, Ethereum, or other digital assets. It aims to provide investors with exposure to the underlying assets, allowing them to buy shares of the ETF, which represent ownership in the cryptocurrencies held by the fund. These ETFs are structured to physically hold the underlying cryptocurrencies in a custodial arrangement.
Bloomberg quoted SFC Chief Executive Officer Julia Leung as saying:
We welcome proposals using innovative technology that boosts efficiency and customer experience. We’re happy to give it a try as long as new risks are addressed. Our approach is consistent regardless of the asset.
Is it really consistent, though?
Hong Kong regulators do aim to treat crypto assets progressively. According to research by Banklesstimes.com, the city-state is one of the best-prepared jurisdictions in the world to embrace crypto. However, their stance on retail investor exposure to this high-risk asset has not been consistent.
Early this year, they limited access to crypto spot ETFs to professional investors who held the HKD equivalent of $1 million in their portfolio. Last month, the SFC gave a wider range of investors the green light. Yet, it ordered them to pass a knowledge test and fulfill net worth requirements, albeit lower than those professional investors have to meet.
The regulator stated:
The policy is updated in light of the latest market developments and enquiries from the industry seeking to further expand retail access through intermediaries and to allow investors to directly deposit and withdraw virtual assets to/from intermediaries with appropriate safeguards.
In addition, platforms issuing listed crypto assets will have to publish risk disclosure statements.
Leung is also quoted by Bloomberg as saying her institution would “be happy” to give more and various classes of investors access to the crypto ecosystem as it develops to a “comfortable point.”
Contributors
