Hong Kong has Limited the Trading of Crypto ETFs to Professional Investors Only

Financial Regulators in Hong Kong have established new rules prohibiting virtual asset intermediaries from offering crypto spot exchange-traded funds (ETFs) to retail investors. According to a joint circular issued on Friday by the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), their motivation is to protect investors from ‘risks associated with investing in virtual assets.’ While that view is not entirely novel, restrictions placed on crypto intermediaries selling ‘complex products’ to retail investors are new. Though crypto spot ETFs have been targeted, the ‘professional investors only’ restriction is not being imposed for the distribution of futures-based crypto ETFs. Under the country’s Securities and Futures regulations, professional investors are defined as those with a portfolio of at least HKD$8 million(US$1 million). The circular reads: “In the case of virtual asset futures contracts traded on a specified exchange which is a regulated futures market, trading is governed by conventional rules. Pricing transparency and potential market manipulation may be less of a concern.” Crypto ETFs typically track the prices of a basket of digital assets, allowing investors to diversify their crypto portfolios without holding any individual assets. Crypto ETFs have already been introduced in Canada, Brazil, parts of Europe, and Dubai. Futures-based crypto ETFs, on the other hand, follow the pri...