The approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) has sent shockwaves through the global financial world, marking a pivotal moment for cryptocurrency adoption. As traditional investors gain regulated access to digital assets, attention is now shifting to another major financial hub—Hong Kong. With its strategic positioning and progressive regulatory framework, Hong Kong is emerging as a key player in the virtual asset ETF space.
Back in December 22, 2023, the Securities and Futures Commission (SFC) of Hong Kong released its Circular on Funds Managed by the SFC Investing in Virtual Assets, officially opening the door for spot virtual asset ETF applications. The SFC made it clear: licensed platforms may now issue and manage spot ETFs tied to approved virtual assets like Bitcoin and Ethereum. These ETFs can be subscribed to or redeemed in-kind or via cash through licensed trading platforms or recognized financial institutions.
This development is particularly significant for traditional investors who have long been cautious about entering the crypto market due to concerns over security, volatility, and unregulated exchanges. Spot virtual asset ETFs offer a familiar investment vehicle—backed by regulation and accessible through established financial channels. In Hong Kong, all such ETFs must rely on locally licensed platforms, ensuring compliance and investor protection.
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Understanding the SFC Licensing Framework
Hong Kong stands as a leading international financial center, known for its mature regulatory environment, robust capital markets, and diverse financial products. The SFC oversees ten distinct types of licenses, each corresponding to specific financial activities. To legally operate in any of these domains, firms must obtain the appropriate license.
When it comes to virtual asset trading platforms, the SFC has so far granted licenses to only two companies:
- Hash Blockchain Limited (HashKey Exchange)
- OSL Digital Securities Limited (OSL Exchange)
Both hold Type 1 (Dealing in Securities) and Type 7 (Automated Trading Services) licenses, authorizing them to provide securities trading and electronic trading platform services within Hong Kong.
However, for institutions aiming to launch spot virtual asset ETFs, the most critical license combination is commonly referred to as the "149" license—a reference to holding Type 1, Type 4, and Type 9 licenses.
- Type 1 License: Permits dealing in securities. This is the foundational license for any firm engaging in ETF issuance or trading.
- Type 4 License: Allows firms to provide advice on securities. This ensures that asset managers can legally guide clients on investment decisions related to virtual assets.
- Type 9 License: Authorizes asset management activities, making it essential for managing ETF portfolios.
Holding all three licenses signals full compliance with SFC requirements for launching and managing virtual asset ETFs.
Key Requirements for Obtaining a "149" License
Securing an SFC license is no small feat. The regulatory bar is high, designed to ensure only qualified and well-resourced institutions enter the market.
1. Corporate Structure and Physical Presence
Applicants must be either a Hong Kong-registered company or a non-Hong Kong entity with a registered office in Hong Kong. Crucially, they must maintain a physical office—preferably in a Grade A commercial building—to demonstrate operational substance.
2. Experienced Management Team
The firm must have a competent leadership team, including:
- At least two licensed responsible officers
- A Chief Risk Officer (CRO)
- One responsible officer must be based in Hong Kong for direct supervision
- At least one must also be a board director
There are no nationality restrictions, but local oversight is mandatory.
3. Capital Requirements
The SFC mandates a minimum paid-up capital of HK$5 million**, with ongoing requirements to maintain liquid capital of at least **HK$3 million. Applicants must also establish a corporate bank account in Hong Kong.
4. Application Process via WINGS Platform
All applications are submitted electronically through the SFC’s WINGS (Web-based Information Gathering System) platform. Whether applying as an individual or corporation, applicants must create a personal or sub-account under an advisory firm’s main account.
For corporate applicants, board approval is required—either through a formal resolution or delegation to an authorized committee or individual.
Processing Times and Appeal Rights
The SFC provides estimated processing times:
- 7 business days: Temporary licensed representatives
- 8 weeks: Ordinary licensed representatives
- 10 weeks: Responsible officers
- 15 weeks: Licensed corporations
If an application is rejected—typically due to failure to meet fitness-and-probity standards or insufficient operational readiness—the applicant has the right to respond before a final decision is made. Should the rejection stand, there is a 21-day window to appeal to the Securities and Futures Appeals Tribunal.
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Industry Outlook: When Will Hong Kong’s Spot Virtual Asset ETFs Launch?
With the U.S. now allowing spot Bitcoin ETFs, momentum is building in Hong Kong. Experts believe this will catalyze increased interest from fund managers and asset managers looking to launch similar products under the SFC’s framework.
According to Onn Wing Keung, CEO of HashKey Exchange—one of Hong Kong’s licensed virtual asset platforms—around 10 fund houses are currently preparing to launch spot virtual asset ETFs, with 7–8 already in active development. Several have partnered with HashKey for custody, trading, and clearing infrastructure. In some cases, HashKey is even co-applying for licenses alongside issuers.
Lei Zhikai, Global Chief Business Officer at OKX, emphasized that U.S. ETF approvals open the door for institutional capital—including pension funds and retirement accounts—to enter the Bitcoin market. Since these ETFs are physically backed, each purchase exerts direct upward pressure on Bitcoin’s spot price, driving both market confidence and inflows.
Similarly, Wang Yi, Director of Quantitative Investment at CSOP Asset Management—one of Hong Kong’s early virtual asset futures ETF issuers—believes that while Hong Kong was first to allow spot ETFs in principle, actual product launches may lag behind the U.S. due to cautious market preparation and compliance timelines.
Chan Pui-chung, Executive Director at Victory Securities, noted that the U.S. approval has been seen as a major validation within the crypto community. Though no Hong Kong fund has formally submitted an application yet, preparations are well underway. He expects multiple applications to surface by early 2025, with approvals potentially following soon after.
Investment strategist Chung Jun from Samsung Asset Management (Hong Kong) added that more jurisdictions are likely to follow suit, fueling broader capital inflows into digital assets. However, he stressed the need for stronger investor education to ensure responsible participation.
Luo Bo Ren, Head of Securities Product Development at HKEX, confirmed that the exchange is fully prepared to support the launch of virtual asset ETFs. He welcomed the SFC’s policy clarity and emphasized HKEX’s role in collaborating with issuers and stakeholders to bring these innovative products to market efficiently.
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Conclusion: Hong Kong’s Strategic Edge in the ETF Race
With numerous large-scale asset managers in Hong Kong managing hundreds of billions in assets under management (AUM), the introduction of spot virtual asset ETFs presents a transformative opportunity. Under the SFC’s push to develop Web3 and digital finance, these ETFs are poised to become a core offering for institutional investors.
The regulatory roadmap is clear, the infrastructure is being built, and market participants are aligning their strategies. While execution timelines may vary, the direction is undeniable: Hong Kong is positioning itself as Asia’s first regulated market for spot virtual asset ETFs, reinforcing its status as a premier ETF hub and strengthening its appeal as a global financial center.
For investors and institutions alike, this marks not just a new product category—but a new era of regulated digital asset investment.
Frequently Asked Questions (FAQ)
Q: What is a "149" license in Hong Kong?
A: The "149" license refers to holding three SFC licenses: Type 1 (Dealing in Securities), Type 4 (Advising on Securities), and Type 9 (Asset Management). This combination is required for firms that want to issue and manage virtual asset ETFs in Hong Kong.
Q: Can foreign companies apply for an SFC license?
A: Yes, non-Hong Kong companies can apply, but they must have a registered office and physical presence in Hong Kong, including a local bank account and at least one responsible officer based in the region.
Q: How long does it take to get an SFC license?
A: For new firms applying as licensed corporations, the process typically takes around 15 weeks. Individual representative applications may be processed in as little as 7 business days.
Q: Are spot virtual asset ETFs already trading in Hong Kong?
A: As of now, no spot virtual asset ETFs have been officially launched. However, several fund managers are actively preparing applications, with product launches expected in early 2025.
Q: Why are physically backed ETFs important?
A: Physically backed ETFs hold actual Bitcoin or Ethereum reserves, meaning each share represents real ownership of the underlying asset. This creates direct demand in the spot market, supporting price stability and transparency.
Q: How does Hong Kong’s approach differ from the U.S.?
A: While both markets regulate ETFs strictly, Hong Kong emphasizes local custody through licensed platforms and requires full "149" licensing. The U.S. initially approved ETFs based on futures contracts before moving to spot approvals with stringent issuer requirements.
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