Hong Kong readies stablecoin regulation, receives first Bitcoin ETF application from Harvest Fund

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Hong Kong is poised to accelerate the development of its crypto market infrastructure in 2024, with both Bitcoin exchange-traded funds (ETFs) and stablecoin regulations on track for launch and implementation. Harvest Fund (HFM), an asset manager based in China, has filed for a spot Bitcoin ETF to the Hong Kong Securities and Futures Commission, according to a report from Tencent News published today.

Details on the Harvest Fund Bitcoin ETF are sparse at the moment, but it’s been confirmed to debut on or after the Lunar New Year holiday on February 10th. The report indicates that Hong Kong’s regulatory body may approve multiple spot bitcoin ETF applications, similar to the US SEC’s approach, to provide fair market access. Although Harvest Fund applied first, other regional financial institutions have also shown interest in launching spot bitcoin ETF products in Hong Kong within the year.

The move comes after Livio Weng, Chief Operating Officer of crypto exchange HashKey, recently disclosed that about ten asset management firms have started developing spot crypto ETFs for Hong Kong, with applications sent to the Hong Kong Securities Regulatory Commission. A report from Bloomberg last week details how Venture Smart Financial Holdings (VSFG) claimed it will launch its spot Bitcoin ETF within Q1 this year.

The push for spot crypto ETFs follows growing interest in stablecoins as well. Bloomberg reports that several Hong Kong companies, including Harvest Global Investments, RD Technologies, and VSFG, are discussing potential stablecoin trials with the Hong Kong Monetary Authority (HKMA).

The trials would assess use cases ahead of impending stablecoin regulations in Hong Kong. A December consultation paper from HKMA outlined licensing requirements for fiat-pegged stablecoins, positioning them as an interface between traditional finance and crypto markets.

Sean Lee, Senior Advisor and Head of Stablecoin at VSFG, said they are “applying for sandbox inclusion along with our consortium partners to demonstrate the potential of programmable digital money while fulfilling prudential requirements.”

An HKMA spokesperson confirmed preparations are underway to launch the stablecoin sandbox arrangement shortly insofar as the applicants show a commitment to “a reasonable plan on issuing FRS in Hong Kong.” FRS here refers to “fiat-reference stablecoin,” a type of stablecoin pegged to the value of a fiat currency, such as the U.S. dollar or euro, and is backed by a government-issued currency.

Fiat-backed stablecoins are the most popular type of stablecoin and are digital assets that have 1:1 backing by a reference asset held by a third-party regulated financial entity. They can be traded on exchanges and are redeemable from the issuer.

According to Eddie Yue, chief executive of the HKMA, stablecoins could “become the interface between traditional finance and the virtual asset market.”

The parallel development of spot crypto ETFs and stablecoin regulations demonstrates Hong Kong’s efforts to enable digital assets while ensuring investor protection through proper market oversight. Crypto ETFs can broaden access, and stablecoin trials allow controlled experimentation, providing gateways between traditional finance and emerging crypto sectors.

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