With this action, Hong Kong would become the first jurisdiction in the Asia-Pacific area to authorize an exchange-based, cryptocurrency-backed investment fund. Additionally, it would place the island in a dominant position in the competition to become the hub for digital assets in the area.

The Securities and Futures Commission (SFC) is expected to approve later this month, according to a Reuters report.

Four applications from mainland Chinese firms have been submitted thus far: Harvest Fund Management, China Asset Management, and Bosera Asset Management.

Harvest and CAM have already received approval from the SFC to offer fund management services pertaining to virtual assets.

Hong Kong would be following in the footsteps of the US, which approved the first spot bitcoin ETFs in January—albeit only as a consequence of legal actions taken by many crypto trading firms—by approving the crypto ETF applications.

Over $58 billion in assets have been accumulated by those US ETFs thus far.

Though it is unlikely to see the same level of investment, Hong Kong's funds market will be hoping that the approvals will give it a boost in the face of obstacles caused by the pandemic and China's slowing economy, including the tight travel restrictions that made it difficult for Hong Kong asset managers to recruit and retain qualified employees.