Hong Kong prepares for retail access to spot cryptocurrency exchange-traded funds, boosting city’s virtual-asset hub ambitions

Hong Kong is preparing to permit retail access to exchange-traded funds (ETFs) that invest directly into cryptocurrencies. This is a significant move as the city intensifies its efforts to expand its emerging virtual-asset industry and establish itself as a major crypto hub. The Securities and Futures Commission (SFC) is poised to authorise funds with direct exposure to virtual assets, including spot virtual asset ETFs. This was jointly announced on Friday by the securities regulator and the Hong Kong Monetary Authority, the city's de facto central bank.

Spot cryptocurrency ETFs provide investors with the opportunity to gain exposure to virtual assets without directly purchasing any crypto tokens. These funds are regarded by the crypto industry as crucial vehicles for making virtual assets more attractive to mainstream investors. Previously, Hong Kong only permitted retail participation in cryptocurrency futures ETFs, which hold virtual-asset futures contracts, rather than direct investments in crypto tokens at their spot prices.

Hong Kong's latest initiative demonstrates the determination of policymakers to restore investors' confidence in virtual assets, following a series of significant financial scandals involving cryptocurrencies. These include the recent cases of Hounax and JPEX in the city, as well as the dramatic collapse of crypto exchange FTX in November last year. This move positions Hong Kong at the forefront of the global crypto landscape, said Neil Tan, managing partner at local fintech consulting firm Tsunami Advisors and chairman of the FinTech Association of Hong Kong.