HSBC Hong Kong has introduced a new feature that enables its customers to trade Bitcoin and Ethereum futures Exchange Traded Funds or ETFs.
Currently, three crypto ETFs are featured — CSOP Ethereum Futures ETF, CSOP Bitcoin Futures ETF and Samsung Bitcoin Futures Active ETF.
Speaking to Decrypt, Jeff Feng, co-founder of Sei Labs, said that this move is crucial as it prevents customers from seeking access to derivatives on unregulated exchanges, resorting to using a VPN.
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He believed that by using ETFs, companies could offer exposure to the crypto market while minimizing regulatory risks. Feng also argued this is especially significant given Hong Kong’s recent indications of embracing the crypto sector.
“If all of the centralized exchanges are getting this much regulatory scrutiny, it wouldn’t be too wise to go out and try to launch another,” Feng said. “It’s much safer to do what’s already been proven. There’s a clear playbook.”
According to Feng, retail traders find ETFs much more appealing due to their simplicity and convenience, especially when compared to other derivatives such as options.
He said that unlike options, which involve understanding concepts like strike prices and gamma, ETFs present a more accessible and straightforward choice.
Online reports showed that HSBC Hong Kong had around 1.7 million active mobile customers by March 2022. The report also revealed that approximately 95 percent of HSBC’s retail transactions in Hong Kong are online.
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Alongside introducing the new services, HSBC is said to have launched the Virtual Asset Investor Education Center. This endeavor intends to safeguard investors from the risks associated with cryptocurrencies by mandating them to review and acknowledge educational materials and risk disclosures before engaging in investments.
According to reports, the education center would be accessible through various HSBC platforms dedicated to virtual assets. These platforms include the HSB CHK Mobile Banking app, the HSBC HK Easy Invest app and online banking services.
Hong Kong regulators signal openness to crypto ventures
The recent news follows speculations in mid-June, as reported by various media outlets, suggesting that the Hong Kong Monetary Authority (HKMA) pressured major banks to accept crypto exchanges as clients.
Companies like HSBC and Standard Chartered were questioned by the central bank and regulator of the region regarding their decision not to engage with crypto exchanges as clients.
In an April 27 letter seen by the Financial Times, the HKMA informed the banks that due diligence on potential customers should not create unnecessary burdens, especially for establishments looking to seize opportunities by setting up an office in Hong Kong.
Hong Kong has become a prospective global cryptocurrency hub in the past few months. The Securities and Futures Commission of Hong Kong began accepting applications for cryptocurrency trading platforms on June 1, demonstrating the region’s openness to such ventures.
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Despite the ongoing U.S. Securities and Exchange Commission lawsuit, pro-Beijing lawmaker Johnny Ng, a member of China’s top political advisory body, invited Coinbase and other crypto exchanges to establish their presence in the city.
However, banks find themselves in a delicate position, balancing the encouragement to support crypto and exchanges with the awareness of the situation in the U.S., as shared by a senior executive who was briefed on the meeting with the banks.
According to Jonathan Crompton, a partner at the law firm RPC based in Hong Kong, the HKMA and the SFC clearly express their expectations. Crompton noted that the HKMA’s stance is distinctive compared to regulators in other parts of the world, as they tend to be more skeptical about cryptocurrencies.
Hong Kong was previously the base for Sam Bankman-Fried’s FTX exchange, until the company relocated to the Bahamas. The stablecoin Tether and the digital assets exchange Crypto.com were launched in Hong Kong.