HKEX Launches Virtual Asset Index Series, Providing a Unified Reference Price for Bitcoin and Ethereum

Scheduled for release on November 15, 2024, this series will serve as a unified benchmark for Bitcoin and Ethereum, addressing regional pricing gaps

Hong Kong Exchanges and Clearing Limited (HKEX) has announced the upcoming launch of the HKEX Virtual Asset Index Series, a unified reference price for Bitcoin and Ethereum in Asia. Scheduled for release on November 15, 2024, this index series will serve as a benchmark for these cryptocurrencies, addressing regional pricing gaps.

The initiative aims to provide consistent and reliable pricing within the Asian time zone (UTC 8), enhancing transparency for investors in the region. Cryptocurrency prices have historically fluctuated widely across global exchanges due to various factors, including liquidity and regional demand. This new index series will reportedly offer investors a clear and consistent pricing framework that factors in data from several exchanges.

Crucially, the indices will be available in United States dollars (USD), providing a universally accepted valuation standard that transcends currency fluctuations and local economic influences. By presenting a standardized benchmark, HKEX aims to attract institutional investors.

This move aligns with HKEX's broader strategy to establish Asia Pacific (APAC) as a hub for digital finance, particularly as digital assets continue to gain popularity worldwide.

A Unified Reference Price for Bitcoin and Ethereum

The HKEX Virtual Asset Index Series will deliver a volume-weighted, real-time pricing benchmark for Bitcoin (BTC) and Ethereum (ETH), derived from aggregating data from leading global crypto exchanges. According to Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing Limited:

"We are pleased to introduce the Hong Kong Exchange Virtual Asset Index Series to meet the regional demand for this rapidly emerging asset class. By providing transparent and reliable real-time benchmarks, we hope to assist investors in making informed decisions, supporting the healthy development of the virtual asset ecosystem."

Aguzin believes that a reliable and standardized benchmark will address the existing price discrepancies across exchanges, providing traders and institutions in Asia with a stable reference.

Tax Breaks and Licensing for Crypto Investments

Coinciding with the launch of this index, Hong Kong regulators are introducing supportive policies for digital asset investment. Following recent proposals, a 0% tax on profits from cryptocurrency trades will apply to both Hong Kong residents and non-domiciled individuals. According to Christopher Hui, Hong Kong's Financial Secretary:

"The government will introduce a new tax regime for profits arising from virtual asset trades. Both Hong Kong permanent and non-permanent residents will be taxed at 0%. This measure will enhance Hong Kong's competitiveness as an international asset management center."

Hui noted that this move reinforces Hong Kong's commitment to being an attractive jurisdiction for asset allocation.

Furthermore, the Hong Kong Securities and Futures Commission (SFC) is preparing a finalized list of fully licensed crypto exchanges by year-end, with plans for a regulatory panel to review licensing in early 2025. Reportedly, this framework will enhance the security and compliance of over-the-counter (OTC) trading and custodial services.

Stablecoin Regulation and Future Developments

In a related development, the Hong Kong Monetary Authority (HKMA) is drafting legislation to regulate stablecoins. According to HKMA's Deputy Chief Executive, Edmond Lau, stablecoin regulation will be finalized in 2023.

This stablecoin regulation will apply to both crypto-backed and fiat-backed stablecoins, ensuring a stable and efficient payment system. Lau also highlighted the HKMA's collaboration with the SFC on licensing crypto exchanges.

HKMA's stablecoin regulation and the SFC's licensing of crypto exchanges are both expected to come into effect in early 2024. Together, these initiatives aim to foster a fully regulated digital asset ecosystem in Hong Kong.

This development also follows HKEX's announcement earlier this year to launch exchange-traded funds (ETFs) tracking the performance of digital assets, subject to regulatory approval. These ETFs will provide investors with an avenue to gain exposure to cryptocurrencies through traditional financial instruments.

Collectively, these initiatives signal Hong Kong's proactive approach to creating a regulated environment for digital assets, aiming to strike a balance between fostering innovation and ensuring investor protection.

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