In capital markets, it is often the case that where the US goes, others follow. When it comes to spot crypto Exchange Traded Funds (ETFs), the US Securities and Exchange Commission (SEC) hasn’t exactly taken the lead, but could certainly catalyze further adoption once it takes the plunge.
According to most analysts, the SEC will approve one or more spot Bitcoin ETFs in the coming days or weeks. Just in time, the Hong Kong Securities and Futures Commission (SFC) has lifted its own embargo on spot crypto funds, stating that it is “prepared to accept applications” for ETFs with direct exposure to virtual assets.
When the SFC initially formulated its regulatory approach to virtual assets in 2018, it imposed strict limits on what kind of investment products could be offered on the retail market. These restrictions were introduced in a bid to insulate retail investors from volatile cryptocurrency prices, ensuring that only professional traders could access crypto funds and derivatives.
In a circular issued on Friday, December 22, the SFC, acknowledged that “the virtual asset landscape has evolved rapidly and begun to expand into mainstream finance.”
Responded to “an increasing number of inquiries” from firms interested in offering spot crypto ETFs to their clients, the regulator laid out the requirements and standards prospective ETF issuers will be expected to meet should they wish to launch such funds.
While the SFC’s updated guidance opens the way for non-professional Hong Kong investors to access spot crypto funds, the regulator noted that ETF issuers should assess their client’s appetite for risk, and whether they have prior knowledge of investing in virtual assets.
If potential investors don’t meet the bar for sufficient knowledge, firms will only be able to offer them crypto investment products after providing “adequate training” on the risks involved.
Issuers will also provide clear warnings about the risks of crypto investments. The proposed warning statements are likely to be familiar to anyone who has ever used a crypto exchange and has become a standard feature of virtual asset investing in any almost form.