Last week, “Limited Partnership Fund Bill” was passed by the Legislative Council of the Hong Kong Special Administrative Region. The bill that aims at attracting private equity, real estate and venture capital funds to set up and operate in Hong Kong also covers investment in digital assets.
The bill will come into operation on August 31st, 2020.
With this bill, Hong Kong has established a new regime for investment funds to be registered in Hong Kong in the form of limited partnerships. It was first introduced in March to provide an alternative investment vehicle for private fund managers raising funds or investing in Asia.
Under this new regime, investment managers need to be licensed by the SFC (Securities and Futures Commission), ensure proper custody of assets, annual audits of independent funds, and be compliant with the AML/CFT.
“Major jurisdictions waking up to regulated Bitcoin products. Great progress in Hong Kong!” noted Gabor Gurbacs, digital asset strategist at VanEck.
The definition of “fund” in the Bill covers, but not limited to, Venture capital, Private equity, and M&A funds, Real Estate Fund, Infrastructure and project funds, Special circumstances fund, Mixed Fund, Non-performing asset fund, Credit Fund, and Funds invested in digital assets such as cryptocurrencies and virtual assets.
Fully Regulated Bitcoin Fund
Today, MV Index Solutions GmbH announced that in partnership with CryptoCompare, it had licensed the MVIS CryptoCompare Bitcoin Index (MVBTC) for its recently launched Bitcoin fund which is available only to institutional and professional investors.
“We are pleased that our Digital Asset Indices continue to be popular and that we are now also the underlying index or Hong Kong’s first regulated cryptocurrency fund,” said Thomas Kettner, Managing Director at MV Index Solutions.
“This will help to strengthen the status of digital assets as an asset class and fulfills the needs of institutional investors.”
The licensing is part of the broader push to bring institutional-grade fund products to investors looking to gain exposure to bitcoin and other cryptos.
“With the launch of their fully regulated Bitcoin fund, VSFG and Arrano Capital will help further the adoption of digital assets that fulfil the needs of institutional investors,” said Charles Hayter, CEO, and Co-Founder of CryptoCompare.
Hong Kong & Bitcoin
Not long back, bitcoin got really popular and increasingly in use in Hong Kong; however, lately, there hasn't been any major capital flight out of it.
While Nic Carter of Coin Metrics says, “unencumbered access to the financial system isn't guaranteed,” Matthew Graham, CEO of Sino Global Capital, points out that “HKD is freely convertible” and as such doesn't see it as a big use case.
anyone noticed or heard about HKers moving their wealth to cryptodollars /bitcoin in anticipation of potentially having to seek asylum overseas? seems like a really obvious move.
— so-called nic carter (@nic__carter) July 12, 2020
They may not be using Bitcoin but seem to be using stablecoins as the trading volume between Hong Kong dollars and USD pegged USDT has been seeing a surge in June on fiat-to-crypto trading platform TideBit. This could be attributed to the national security law enacted by China on June 30.
However, much of trade happens over-the-counter (OTC) in mainland China and Hong Kong, so it’s hard to know the real trading volume and interest in stablecoins and digital assets.