Hong Kong regulators said that Hong Kong will soon be allowing licensed cryptocurrency exchanges to provide custody services, including offering custody for virtual asset spot exchange traded funds (ETFs).
At the Hong Kong Web 3.0 Expo, Hong Kong Securities and Futures Commission (SFC) Executive Director of Investment Products Clara Chiu said today that the commission will issue a circular today allowing the provision of crypto custody services. Note that the custody allows investors to lock up their cryptos to support the blockchain network and receive rewards.
However, due to the risks involved, the SFC will implement additional security, including requiring licensed platforms to safeguard the pledged virtual assets and setting limits on the proportion of crypto spot ETFs that can be pledged to manage liquidity risk.
Chiu pointed out that the China Securities Regulatory Commission began to build a cryptocurrency regulatory framework as early as 2018. In April last year, Hong Kong became the first region in Asia to launch a crypto spot ETF. It has now become the largest virtual asset ETF market in the Asia-Pacific region. She revealed that the CSRC is expanding the scope of eligible crypto products, even going beyond the Bitcoin and Ethereum ETFs. Now that more virtual assets are eligible for retail trading on licensed platforms, it will pave the way for the diversification of ETF products, such as a single ETF tracking a range of virtual assets.
Chiu added that given Hong Kong’s geographical location, crypto regulatory framework, the region is an ideal hub for Web3 projects. Moreover, SFC’s recent regulatory framework in February this year, dictates a comprehensive plan for the development of the crypto market, including the upcoming licensing framework for crypto over-the-counter trading and custody services.
