UBS Embraces Crypto ETFs in Hong Kong Amid City's Digital Hub Ambitions

UBS Group AG has joined counterparts like HSBC Holdings Plc in permitting clients in Hong Kong to engage in the trading of certain cryptocurrency-linked exchange-traded funds (ETFs), aligning with the city's initiative to establish itself as a digital asset hub, reports Bloomberg.

A source, wishing to remain anonymous when discussing confidential details, revealed that three crypto ETFs authorized by the Securities and Futures Commission will be made available to affluent clients on UBS's Hong Kong platform starting from Friday. The Swiss bank has incorporated the Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures ETFs. Additionally, clients will have access to educational materials to enhance their understanding of associated risks. UBS refrained from providing comments.

Hong Kong implemented a digital asset regulatory framework on June 1, aiming to safeguard investors while fostering the growth of a digital hub. As per the regulations, the SFC allows retail investors to trade major tokens on licensed exchanges. The agency currently permits futures-based ETFs and is evaluating the possibility of allowing spot crypto ETFs.

Despite efforts to position itself as a forward-looking financial center, Hong Kong faced setbacks with the recent collapse of the unlicensed JPEX exchange due to fraud allegations. Consequently, the city intensified scrutiny of the crypto industry by establishing a joint SFC-police task force to monitor suspicious activities.

The cryptocurrency sector is gradually recovering from the $1.5 trillion market downturn in 2022 and notable incidents like the bankruptcy of FTX platform's Sam Bankman-Fried. Speculation regarding the potential approval of the United States' first spot Bitcoin ETFs has contributed to a twofold increase in the largest token's price this year.

While financial institutions globally remain cautious about compliance risks, some are showing increased involvement in the crypto economy. DBS Group Holdings Ltd. has expressed its intention to seek a license to offer crypto services to Hong Kong customers. ZA Bank Ltd., the largest virtual bank in Hong Kong, plans to facilitate token-to-fiat currency conversions over licensed platforms. SEBA Bank AG, a crypto bank backed by Julius Baer Group Ltd., has secured a license for its unit to deliver crypto services in Hong Kong.

The CSOP Bitcoin Futures and CSOP Ether Futures funds, labeled as Asia's inaugural listed Bitcoin and Ether futures ETFs upon their launch in December, currently have a combined asset value of approximately $70 million. This reflects a diminished interest in crypto compared to the peak of the market's pandemic-era surge.