Hong Kong has broken new ground by becoming the first jurisdiction to allow trading in Bitcoin and Ethereum cash exchange-traded funds (ETFs). Whereas the US Securities and Exchange Commission (SEC) is still analysing similar proposals, Hong Kong’s Securities and Futures Commission (SFC) has already authorised several leading financial companies to create these ETFs.
A number of leading financial firms, including China Asset Management, Bosera Capital and HashKey Capital Limited, are among those that have received the green light from the SFC to create Bitcoin and Ethereum cash ETFs. Together, these innovative financial products allow investors to buy shares of Bitcoin and Ethereum directly with cash.
In addition, a preliminary approval has been received from the Commission for Harvest Global Investments to develop further cash ETFs on Bitcoin and Ethereum digital assets, indicating a significant expansion of the digital asset investment sector.
Commenting on the approvals, Han Tongli, CEO and IT Director of Harvest International, said:
“This time Harvest’s investment in two major digital asset spot ETF products has been approved in principle, which not only highlights Hong Kong’s competitive advantages in the field of digital assets, but also demonstrates Harvest International’s drive to promote industry innovation and satisfaction. This is a reflection of our continued leadership and innovation in the field of blockchain assets and AI investment.”
Restrictive Crypto Policies in Mainland China
On the other hand, mainland China’s strict ban on cryptocurrencies makes it unlikely that Bitcoin and Ethereum ETFs will be available only in Hong Kong. Long-term issuers in Hong Kong have confirmed that regulatory hurdles prevent mainland Chinese funds from investing in these cryptocurrency-linked ETFs.
The Hong Kong ETF issuers’ disclosures have corrected misconceptions about the investment opportunities offered to Chinese investors by the Southbound Stock Connect programme.
The initiative, designed to enable cross-border investment between mainland China and Hong Kong, explicitly excludes digital currency products due to China’s firm stance on the risks associated with cryptocurrencies.
Hong Kong Monetary Authority Promotes Digital Currency Initiatives
Since July last year, the Hong Kong Monetary Authority (HKMA) has been advocating the development of digital currencies as a mainstream means of exchange.
Consequently, Hong Kong’s banking regulator has encouraged local financial institutions to consider meeting the special requirements of cryptocurrency exchanges, including holding frequent meetings to respond to requests from these customers.
Mainstream banks, including HSBC and Standard Chartered, have dedicated themselves to developing the infrastructure that allows licensed cryptocurrency regulators easy access to banking services in Hong Kong.
In addition, leading cryptocurrency companies such as OKX, Bybit and Huobi, founded by Chinese-born entrepreneurs, have declared their intention to apply for the new licensing opportunities.
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