The Hong Kong Securities and Futures Commission (SFC) is open to approving exchange-traded funds (ETFs) that directly invest in crypto, provided that regulations address new risks. So far, the regulator has approved two Bitcoin futures ETFs and one Ethereum futures fund.
The SFC’s chief executive, Julia Leung, said the regulator will entertain proposals that “boost efficiency and customer experience.” Earlier this year, many investors viewed US investment manager BlackRock’s application to launch a Bitcoin (BTC) exchange-traded fund as a sign the market was ready for a spot ETF.
The Hong Kong Monetary Authority (HKMA) is also developing guidelines to help banks hold tokenized assets. Its efforts may help the SFC develop rules on how to secure crypto assets held in exchange-traded funds.
The US Securities and Exchange Commission (SEC) has delayed approving Bitcoin ETFs for fears the underlying market could be manipulated. The agency does not want customers to lose assets if the price of Bitcoin goes down.
Several companies, including BlackRock, Bitwise Asset Management, Fidelity Investments, and Franklin Templeton, have applied to launch Bitcoin ETFs. Grayscale Investments is pursuing the conversion of its closed-ended Bitcoin trust into a spot ETF.
The SEC said spot funds could be prone to manipulation and be potentially harmful to US investors. To mitigate this risk, several investment managers amended their applications to include market surveillance agreements with exchanges.
For example, Coinbase Custody safeguards digital assets on behalf of BlackRock. It uses multiparty computation that prevents the easy theft of crypto, but there is no explicit law standardizing this arrangement.
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