The Securities and Futures Commission (SFC) of Hong Kong, on Monday, published a detailed circular of the requirements that managers of exchange-traded funds must meet in order to list their crypto products in the city.

The circular said: “SFC has been actively seeking a regime that would allow the authorization of investment products that provide exposure to VA and meet investor demands with adequate safeguards from an investor protection perspective.”

Part of the requirements on what the SFC expects of any ETF issuer seeking regulatory approval to list a crypto futures product in Hong Kong includes virtual asset products to meet the supervisory needs of investment funds, mutual funds and unlisted structured products.

In addition, issuers of virtual asset futures ETFs have a good track record of regulatory compliance and a proven track record of at least three years managing ETFs.

ETF issuers to affirm that virtual asset ETFs have adequate liquidity to operate and demonstrate that the contracts are manageable and how rollover costs will be handled.

“Only Bitcoin futures and Ether futures traded on the Chicago Mercantile Exchange are allowed,” SFC noted. The Securities and Futures Commission added that it would consider expanding the scope of eligible virtual asset futures markets where appropriate.

Another requirement the SFC mentioned was that the virtual asset ETF management company must allow flexibility in portfolio configuration, ongoing strategy and handling of any market upside events. And also to provide comprehensive investor education ahead of the launch of the VA Futures ETF in Hong Kong.

SFC noted that the net exposure to derivatives must not exceed 100% of the total net asset value of the ETF. At the end of the note, the circular referenced the VA futures ETF product key facts statement to contain the initial disclosure of the investment objective and critical risks correlated with an investment in VA futures.

On Monday, the HKSAR government released its latest policy statement related to the prospects for the development of virtual assets, including the issuance of tokenized green bonds and preparing for the development of the digital Hong Kong dollar.

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