Hong Kong Outlines New Rules For Crypto Futures ETF Issuers

The Securities and Futures Commission (SFC) of Hong Kong, on Monday, published a detailed circular of the requirements exchange-traded fund managers need to meet to list their crypto products in the city.

The circular read, "SFC has been actively looking into a regime that would enable the authorization of investment products providing exposure to VAs and would meet investor demands with appropriate safeguards from an investor protection perspective."

Part of the requirements on what the SFC expects from any ETF issuer that aspired regulatory approval to list a futures crypto product in Hong Kong include virtual assets products to meet the needs overseeing unit trusts, mutual funds, and unlisted structured products.

Additionally, virtual assets futures ETF issuers have a good track record of regulatory adherence and a proven track record of a minimum of three years in managing ETFs.

ETF issuers to affirm virtual asset ETFs have adequate liquidity for operation and prove that contracts are manageable and how roll costs will be handled. 

"Only Bitcoin futures and Ether futures traded on Chicago Mercantile Exchange are allowed." Noted SFC. The Securities and Futures Commission added that it would consider broadening the scope of eligible virtual assets futures markets when suitable.

Another requirement the SFC mentioned was about the management company of virtual assets ETF having to allow flexibility in portfolio configuration, rolling strategy, and handling any market uprising events. And also to do comprehensive investor education prior to the launch of the VA Futures ETF in Hong Kong.

SFC noted that net derivative exposure should not surpass 100% of the ETF's total net asset value. At the end of the note, the circular mentioned the product key facts statement of a VA Futures ETF to contain upfront disclosure of the investment objective and critical risks correlated with an investment in VA futures.

On Monday, the HKSAR government published its latest policy statement related to the outlook of virtual assets development, including the issuance of tokenized green bonds and the preparation of developing the digital Hong Kong Dollar.