Hong Kong's Securities and Futures Commission (SFC) attracted global attention by approving three institutions to issue Bitcoin and Ethereum spot ETFs. This is a significant improvement compared to the United States, which has yet to approve Ethereum ETFs and only allows cash settlement.
OSL, the first compliant and licensed cryptocurrency exchange in Hong Kong, is at the forefront of this development. The SFC requires ETF issuers to trade and deposit through compliant exchanges. Among the three approved BTC/ETH ETF issuers, two cooperate with OSL.
In a recent meeting, OSL CEO Patrick Pan and Wayne Huang, head of OSL's ETF business, answered questions on the subject.
When asked why approvals were received so quickly in Hong Kong, Pan explained that both Bosera and ChinaAMC companies began their research shortly after SFC's ETF announcement in December 2023. They formally approached OSL in January 2024 to launch their ETF, a timeline Pan described as “unusually fast.”
“Hong Kong's regulatory framework has always been relatively clear,” Pan said.
“There is essentially one regulatory authority for securities and futures in Hong Kong, the SFC. They have already made a distinction between those called securities and those that are not. Under this regulatory framework, non-securities such as BTC and ETH can be made available for retail trading on a priority basis.”
The SFC has long defined both BTC and ETH as non-securities. “When we want to list a coin on a compliant exchange, we must first have a legal opinion explaining why this thing is not a security, and this legal opinion must be approved by the SFC,” Huang said and added:
“The commission has its own approval criteria. Currently, we have listed approximately more than a dozen coins that are not securities (AAVE, BAT, BCH, COMP, GRT, LINK, LTC, UNI, USDC, USDT).”
Huang explained what the provisional approval given in ETF approvals means:
“The difference lies in the final details of the documents, including the filing procedures for listing on the Hong Kong Stock Exchange. This also includes some procedures regarding final subscription with customers when the fund is first launched. These may require some preparation time. “So basically, there will not be much difference in the content of the approval documents, but there may be some procedural requirements that various parties, including the Hong Kong Stock Exchange and investors, may need some time to prepare.”
Regarding whether mainland investors can buy or sell through Southern funds, Huang noted that these investors must first obtain approval from the ETF issuer. However, Huang expects the main focus initially to be offshore funds.
When asked about the possibility of other tokens for ETFs being released in the future, Huang responded positively:
“I think this is highly likely because SFC is actively researching and encouraging the market to do research in this area as well. But it could be a gradual process.”
*This is not investment advice.
