November 03, 2022

Retail Investors in Hong Kong May Trade Virtual Asset Futures ETFs


On 31 October 2022, the Hong Kong Securities and Futures Commission (SFC) published a circular (SFC Circular) on virtual asset (VA) futures exchange traded funds (ETFs). The SFC Circular sets out certain additional requirements which the SFC would consider in connection with authorising ETFs that provide exposure to VAs primarily through futures contracts eligible for public offering to retail investors in Hong Kong under sections 104 and 105 of the Securities and Futures Ordinance. 

Initially, only Bitcoin futures and Ether futures traded on Chicago Mercantile Exchange are considered eligible futures under the SFC Circular but the SFC did indicate that it will consider expanding the scope of eligible VA futures markets. The SFC also indicated that it will consider accepting delegation or co-management arrangements of a VA Futures ETF where the lead or co-management company has a good track record of regulatory compliance together with at least three years’ proven track record in managing ETFs – this should help to foster collaboration and innovation between the fintech community and traditional fund management businesses.

The SFC Circular was published soon after the Hong Kong government issued a policy statement on the development of VA in Hong Kong, in which the Hong Kong government committed to provide a facilitating environment for the promotion of the sustainable and responsible development of the VA sector in Hong Kong. Pilot projects include non-fungible token (NFT) issuance for Hong Kong FinTech Week 2022, Green bond tokenisation, and e-HKD.

Earlier in January 2022, the SFC and the Hong Kong Monetary Authority already issued a “Joint circular on intermediaries’ virtual asset-related activities” which allowed SFC-licensed and registered intermediaries to offer trading of eligible VA Futures ETFs to retail investors in Hong Kong. The SFC Circular and the Hong Kong government’s policy statement are now further recognition that VA-related investment products are becoming increasingly popular with investors and have a place in Hong Kong’s future investment landscape.

We now have a strong signal from the Hong Kong government and the regulator that Hong Kong is a jurisdiction open to fostering the VA sector, with appropriate levels of regulation. The latest development is indeed exciting and welcome news during Hong Kong FinTech Week 2022.

The SFC Circular can be viewed here and the government's policy statement here.


May be of interest to you:

Regulatory Approach to Digital Assets in Hong Kong and Singapore

New Regulatory Regime for Virtual Asset Service Providers in Hong Kong – Are You Ready?

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