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Hong Kong regulators have approved bitcoin and ether exchange-traded funds (ETFs), sending another signal that Hong Kong is positioned to serve as a hub for well-regulated crypto activity.
April 15 news has emerged indicating that several firms have received conditional approval from the Hong Kong Securities and Futures Commission (SFC) to offer spot Bitcoin and Ether ETFs. Among the companies that acknowledged the SFC’s approval was Hong Kong-based digital asset platform OSL, which will serve as sub-custodial partner for ETFs to be issued by China Asset Management, another Hong Kong-based firm.
While no timeline was given for when the series of approved ETFs could begin trading on regulated exchanges, the announced approval offers further indication that Hong Kong has emerged as an important hub for crypto market innovation in the Asia-Pacific region with a clearly defined regulatory perimeter. In its statement of approvals, OSL he said that, “With several markets around the world hosting Spot BTC/ETH ETFs, Hong Kong’s initiative puts it alongside pioneering regions such as Canada, Germany and Switzerland. . . The potential for the Hong Kong market is significant and attracting market attention.” This sentiment has been echoed by others across the crypto industry, particularly in the APAC region.
Over the past year, crypto market participants have increasingly welcomed moves by Hong Kong regulators to offer a robust and comprehensive, but ultimately well-designed and clear framework for cryptoassets. Hong Kong’s licensing framework for virtual asset trading platforms was unveiled last summer and is administered by the SFC. Recently, the Hong Kong Monetary Authority (HKMA) announced the launch of a regulatory sandbox for stablecoin issuers.
The news of the SFC’s conditional approval of Bitcoin and Ether ETFs comes just four months after the US Securities and Exchange Commission (SEC) approved 11 Bitcoin ETFsand as is also considers whether to approve Ether ETFs for US trading. While the approval of ETFs bolstered the view of Hong Kong as a crypto hub and was good news during a week of falling cryptocurrency prices, some observers were also notice carefully that Hong Kong products can only attract limited inflows if they are not legally available to mainland Chinese investors.
To learn more about the development of crypto regulation in Hong Kong, watch our on-demand webinar Ambitions of Hong Kong’s crypto hub.
US SEC Director Makes Remarks on Cryptocurrencies Amid News of DeFi Applications
In the US, a senior SEC official has warned that it will remain aggressive in its pursuit of perceived regulatory violations in the crypto space – remarks that came after news broke that the SEC was targeting one of the biggest players in decentralized finance (DeFi). .
U public remarks filed on April 3, Gurbir S. Grewal, the SEC’s director of the Division of Enforcement, made it clear that the SEC will not back down from its intense and aggressive stance on cryptocurrency enforcement. Citing the SEC’s concern that investors remain vulnerable to fraud and manipulation in the crypto markets, Grewal firmly stated that “we remain committed to using all the tools at our disposal to protect the investing public, including the risks in the crypto markets.”
Grewal’s insistence that the SEC will continue to aggressively rely on its enforcement powers is not surprising, as it echoes SEC Chairman Gary Gensler’s frequent statements over the past three years. The SEC’s willingness to take crypto firms to court not only for cases of alleged fraud, but also for alleged violations of securities laws that the SEC believes the crypto firms failed to properly register as securities exchanges has drawn intense criticism from the crypto community , which claims that the SEC has failed to provide adequate clarity for the private sector that can ensure compliance with rules and regulations.
Grewal’s comments also came just a week before revelations emerged that the SEC was taking the fight directly to one of the biggest players in the DeFi ecosystem. On April 10, the chief legal officer of Uniswap Labs, which is behind the decentralized exchange (DEX) Uniswap, acknowledged on Twitter that the SEC issued Uniswap with Well’s notice – a formal letter stating that the SEC is considering taking enforcement action against Uniswap for operating a securities exchange without registering with the SEC.
The news is not unexpected, as the SEC has indicated for some time that it is concerned about activity in the DeFi space. But the news has raised concerns from across the crypto space that the move is another indication of further regulatory overreach by the SEC. Kristin Smith, CEO of the Blockchain Association, a leading industry group, stated that the news represents “exaggeration by the SEC in its efforts to expand its jurisdiction beyond its mandate.” Smith called on Congress to pass new legislation that would provide a clear regulatory framework for digital assets.
In response to Wells’ notice, Uniswap made it clear that it will fight any charges the SEC brings against it in court.
South African crypto exchanges confirm approval of cryptocurrency registration
Cryptoasset Service Providers (CASP) in South Africa have confirmed that they have received approval under the country’s new regulatory framework for cryptoassets.
April 11, Coindesk registered that two South African CASPs, Luno and Zignaly, have confirmed that their license applications have been approved by the Financial Services Authority (FSCA). On April 15, the second CASP, VALR, acknowledged publicly that it is also licensed by the FSCA.
This recognition comes a month later news has emerged indicating that the FSCA expects to approve approximately 60 CASP licensing applications under the country’s cryptocurrency regulatory regime, which came into effect last year. These CASPs will have to comply with anti-money laundering and counter-terrorist financing (AML/CFT) measures and must also meet capital buffer requirements to protect users of their platforms from potential losses.
The FSCA still needs to decide whether to approve approximately 250 other CASP licensing applications, which are still under review. But its progress in approving nearly 5 dozen applications so far suggests the country may be positioning itself as a hub for crypto activity in Africa.
The UK plans to finalize cryptocurrency legislation by the summer
The UK government has indicated that it expects to complete the first phase of its planned legislative updates on cryptocurrencies and stablecoins by July.
On April 15, Economic Secretary Bin Afolami stated that the UK is making steady progress in developing stablecoin legislation and crypto staking activities, and should be in a position to enact the necessary measures by June or July.
Under the expected measures, issuers of stablecoins will have to register with the UK’s Financial Conduct Authority (FCA) and will have to take steps to ensure they comply with regulations relating to consumer protection and AML/CFT. The Bank of England will also have oversight of stablecoin issuers that it determines are operating as systemic payment systems that could pose a greater risk to the UK financial sector.
The completion of these measures forms a key part of the UK government’s aim to leverage cryptocurrencies as part of efforts to innovate the UK financial sector and to remain competitive with the European Union, where new stablecoin measures are due to be available this summer under the Markets in Cryptoassets regulatory regime. (MiCA).
Lithuania is expected to take a tough approach regarding MiCA licenses
CASPs in Lithuania expect a tough stance from the country’s central bank as it moves towards implementing MiCA in the domestic market from the end of this year.
According to reports, Lietuvos Bankas, the central bank of Lithuania, is in the final stages of planning its licensing process for CASPs under MiCA. The central bank plans to give CASPs already registered in Lithuania six months to apply for an enhanced license under MiCA, which will require them to comply with consumer protection, market conduct and other measures designed to ensure their safety and reliability. A representative of Lietuvos Bankas told reporters that the central bank expects that many CASPs will not be able to meet the necessary thresholds for approval and will therefore have to cease operations in Lithuania.
To learn more about MiCA, read our previous analysis.
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