Crypto industry executives anticipate Hong Kong will progress in transforming its powerhouse in traditional finance into a crypto-friendly hub. As such, the industry leaders predict Hong Kong will emerge among the front-runners in Asia to authorize spot Bitcoin exchange-traded funds (ETFs) after the US securities regulator approves pending such applications.
Hong Kong Portrays Decent Stage for Spot ETFs
Animoca Brands co-founder and chair Yat Siu labelled the stance portrayed by Hong Kong’s Securities and Futures Commission (SFC) towards digital assets as encouraging. The Vienna-born entrepreneur hailed SFC as setting the decent stage to allow spot Bitcoin ETFs.
The angel investor behind Animoca Brands’ rise to a global giant in gaming software development is reflected in recent pronouncements by SFC. In particular, he cites the regulator’s statement in November indicating that it was open to broadening the access to crypto assets that Siu considered to imply the spot crypto ETFs.
The welcoming nature portrayed by SFC coincides with a time when industry leaders consider the US is edging closer to the approval of spot Bitcoin ETF. Siu illustrates that multiple application revisions signal efforts to align with the SEC’s demands, particularly concerning ETFs’ creation and redemption models.
Siu admitted that he anticipates Hong Kong following suit, considering that the US SEC has already done enough essential work. He adds that Hong Kong’s SFC could leverage loads of public filings and applications to reference in its course.
Hong Kong’s Quest for Regulatory Clarity
Hong Kong is rolling out the welcoming mat the crypto firms have desired, particularly those hailing from the US. The move contrasts the restrictive nature portrayed by mainland China in imposing a crackdown on digital assets trading and mining.
Market observers laud the Hong Kong authorities for the crypto-friendly attitude portrayed, even encouraging banks to collaborate and support the course. The journey traces to October 2022, when Hong Kong unveiled a raft of pro-crypto policies towards strengthening its reputation as a global financial center.
Hong Kong would mid-2023 unveil the crypto licensing regime harmonizing the requirements for virtual asset trading. The changes restricted retail trading services only to the licensed exchanges.
In November, SFC chief executive Julia Leung disclosed that the regulator is assessing the viability of spot crypto ETFs. The executive welcomed proposals leveraging innovative technology to bolster efficiency and customer experiences.
Hong Kong hosts futures-based crypto ETFs, including CSOP Bitcoin Futures ETF, Samsung Bitcoin Futures Active ETF, and CSOP Ether Futures ETF. Nonetheless, Hong Kong would witness an accelerated appetite for spot crypto ETFs from the existing spirit.
Glenn Woo heads sales in Web3 infrastructure specialist Blockdaemon iterated Hong Kong to grow beyond the current appetite for regulated crypto. He observed that though uncertain on the date, the region would witness surging appetite after the US SEC approves the spot Bitcoin ETF.
Potential Liquidity Challenges for ETF Launch
Woo observed hesitations from likely ETF issuers despite the huge demand for the spot Bitcoin ETF. The launch of the Bitcoin ETF would rely upon a collaborative effort involving conventional custodians, crypto-native custody, and wallet service firms.
Hong Kong faces liquidity concerns, particularly in defining the marketplaces where asset managers can procure.
Woo expressed concerns that the regulator would permit other virtual asset service providers to offer liquidity. Such may prove inadequate to necessitate open US venues or require liquidity pull towards supporting the spot ETF launch.
Asia to Dictate Shift in Crypto’s Industry
Crypto exchange Woo co-founder Jack Tan considers that Asia will likely shift the industry’s attention away from the West in 2024. He observed that the ending cycle had the West dictate play, mainly led by BTC accumulation by Michael Saylor’s MicroStrategy and PayPal’s unveiling stablecoin.
The emerging cycle will see the East drive the industry mainly through the resurgent retail participation led by major economies, including South Korea, Japan, and Hong Kong.
The Chainalysis head of APAC policy, Chengyi Ong, termed 2023 the regulation cycle in Asia. The policy specialist at the blockchain research firm project 2024 is when Asia will realize practical implementation.
Ong indicated that Asia would likely witness the regulatory frameworks passed in 2023 enforced in 2024. He suggested that the enforcement would not be restricted to the lighthouse jurisdictions such as Singapore and Hong Kong.
Instead, Ong considers regulatory enforcement as a broader regional practice. Australia will likely enforce the consultation paper on regulating digital asset platforms.
Korea is active in the enforcement party for its recently passed virtual asset user protection law. Consequently, 2024 will feature a comprehensive regional implementation of the frameworks.
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