The turning point in Hong Kong: Bitcoin ETFs in the spotlight.

The Hong Kong branches of some of the major Chinese asset managers, such as Harvest Fund, are ramping up their activities in the field of cryptocurrencies, not only exploring Bitcoin spot ETFs but also discussing potential tests for stablecoins with monetary authorities.

The Hong Kong arm of Harvest Fund Management, a major Chinese asset manager, submitted an application for a Bitcoin spot ETF to the Securities and Futures Commission (SFC) of Hong Kong on January 26th. The aim was to launch the first ETF of its kind in the city shortly after the Lunar New Year holidays.

Around 10 fund companies, including the Hong Kong crypto exchange HashKey, are considering launching cryptocurrency ETFs, indicating a growing interest in such financial instruments in the region.

Venture Smart Financial Holdings Ltd. (VSFG), based in Hong Kong, has stated its intention to launch its cash-settled Bitcoin ETF within this year, according to Bloomberg.

In parallel, in response to Hong Kong's efforts to develop rules for stablecoins, companies like Harvest Global Investments, RD Technologies, and VSFG have expressed interest in stablecoin-related tests. These companies are in talks with the Hong Kong Monetary Authority, the city's de facto central bank, to discuss potential stablecoin tests.

Sean Lee, senior advisor and head of stablecoins at VSFG, reported that the sandbox process for stablecoins is expected to begin in the first quarter, with a duration extending until the first half of 2024. Lee emphasized VSFG's commitment to supporting Hong Kong as an international center for virtual assets by participating in the sandbox process with consortium partners to demonstrate the potential of programmable digital currency.

A spokesperson for the HKMA confirmed that the sandbox's establishment is aimed at fiat-backed stablecoin issuers with genuine interest and a reasonable plan for issuing fiat reference stablecoins in Hong Kong, anticipating the announcement of relevant details regarding the sandbox launch.

Recently, the HKMA and the Financial Services and the Treasury Bureau outlined in a joint consultation paper that a stablecoin issuer must obtain a license from authorities if it intends to issue a stablecoin referencing the value of one or more fiat currencies in Hong Kong. Eddie Yue, chief executive of the HKMA, highlighted the potential of stablecoins as an interface between traditional finance and the virtual asset market, underscoring their importance for integrating the digital payments ecosystem with the real economy.