Hong Kong crypto exchange OSL foresees issuance of first Spot Crypto ETFs by mid-year

Gary Tiu, the Executive Director and Head of Regulatory Affairs at OSL, a Hong Kong-licensed cryptocurrency exchange, has revealed that the special administrative region could potentially witness the introduction of its first spot cryptocurrency exchange-traded funds (ETFs) by the middle of this year. 

This development comes as Hong Kong continues to explore opportunities in the rapidly evolving cryptocurrency market.

Close collaboration and emerging interest

In a recent interview with local media, Gary Tiu disclosed that OSL is actively engaged in discussions with numerous fund companies, with approximately five to ten entities currently exploring the possibility of launching spot crypto ETFs. 

Tiu highlighted that around five of these companies have made significant progress and could potentially roll out Hong Kong’s inaugural spot crypto ETFs by mid-2024.

This endeavor to bring spot crypto ETFs to Hong Kong is not without its challenges. Tiu acknowledged the need to ensure that fees associated with these products remain reasonable, especially considering that there are only two licensed cryptocurrency exchanges in the city, as reported by local media.

Pivotal development in Hong Kong’s crypto landscape

Gary Tiu emphasized the significance of introducing spot crypto ETFs in the city’s financial landscape, stating that they offer several crucial advantages. These include promoting orderly markets for the underlying digital assets, establishing a robust model for local investor protection, and expediting integration between regulated digital asset platforms and traditional financial institutions.

Tiu’s comments come in the wake of HashKey, another licensed crypto exchange in Hong Kong, announcing discussions with asset managers regarding the potential launch of spot crypto ETFs earlier this month. 

Livio Weng, the Chief Operating Officer of HashKey, disclosed that approximately ten fund companies have initiated exploratory talks concerning introducing such ETFs in Hong Kong.

Venture Smart Financial Holdings Ltd’s ambitious plans

Additionally, Venture Smart Financial Holdings Ltd, a Hong Kong-based financial services firm, recently unveiled plans to potentially launch a spot bitcoin ETF within the first quarter of this year. 

Bloomberg reported that the company aims to grow the potential ETF to reach $500 million in assets under management by the end of 2024, highlighting the growing interest in crypto ETFs within the region.

The push towards spotting crypto ETFs in Hong Kong has been met with regulatory preparations by authorities. In December, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, jointly announced that they had reviewed their existing policies to facilitate the introduction of spot crypto ETFs. The regulators published two circulars addressing the requirements for spot crypto ETFs.

The SFC outlined that transactions involving cryptocurrencies within spot crypto ETFs should be executed through SFC-licensed crypto platforms or authorized financial institutions, a move aimed at ensuring regulatory oversight and investor protection.

Current cryptocurrency ETF offerings in Hong Kong

Hong Kong has listed several futures-based cryptocurrency ETFs, including the Samsung Bitcoin Futures Active ETF, CSOP Bitcoin Futures ETF, and CSOP Ether Futures ETF. These offerings have exposed investors to cryptocurrency markets through futures contracts. Still, introducing spot crypto ETFs would offer a different investment vehicle focused on directly owning digital assets.

The cryptocurrency market in Hong Kong and worldwide is evolving rapidly, with growing interest from institutional and retail investors. Introducing spot crypto ETFs in Hong Kong would mark a significant milestone in providing investors with more diversified and regulated options for participating in this dynamic market.

As discussions and preparations for spot crypto ETFs continue to advance, the financial industry in Hong Kong is poised for a potential transformation in the coming months, with market participants closely watching the launch of these innovative investment products.