Animoca Brands to take stake in Chinese investment platform’s unit

Animoca Brands has signed a term sheet to form a strategic partnership with GROW Investment Group, China’s leading investment and asset management platform.

The company also invested in GROW Asset Management (HK) Limited, which will be renamed GROW Digital Wealth (GDW).

Animoca Brands, a global digital assets leader, intends to acquire up to a 15% equity stake in GDW, pending final agreements and approvals.

The partnership aims to build GDW into a platform that offers both cryptocurrency and traditional finance investment products to family offices and ultra-high-net-worth individuals in Asia.

GDW holds multiple licenses from the Hong Kong Securities and Futures Commission, allowing it to provide securities dealing, advisory, and asset management services.

Animoca Brands will introduce cryptocurrency assets, including real world assets, to the platform, while GROW will bring its curated investment products.

Both parties also plan to introduce educational initiatives related to the convergence of traditional and decentralized finance.

🔗 Source: Animoca Brands

🧠 Food for thought

Implications, context, and why it matters.

Key features of Hong Kong’s regulatory framework for crypto funds

Since 2018, Hong Kong license holders have been allowed to run cryptocurrency funds 1.
In April 2024, Asia saw its first bitcoin and ether spot exchange-traded funds (ETFs) list in Hong Kong, which may take in-kind subscriptions (investors can subscribe using the underlying coins rather than cash) 1. Two of these ETFs can stake up to 30% of coin holdings (lock up coins on a network in return for yield) 1. Certain SFC licensees can trade on Deribit (a crypto derivatives exchange) and Binance 1.
Type 9 license holders (the SFC category for asset management) must seek an upgrade to manage VA portfolios if they manage funds with a VA investment objective or invest 10% or more of a portfolio’s gross asset value in VAs 2. Firms below 10% fall under the De Minimis Exemption and must notify the SFC 2.

Implications for infrastructure providers serving crypto-enabled wealth managers

Near-term market spans 35+ licensed VA fund managers in Hong Kong 1 plus firms upgrading Type 9 licenses 2.
Firms must follow SFC terms and conditions for virtual asset fund managers and for intermediaries dealing in or advising on VAs 3. They may only use SFC-licensed virtual asset trading platforms (Hong Kong-licensed crypto exchanges) 3.
Vendors should map who already runs VA mandates, then track firms under the De Minimis Exemption that may upgrade as client demand grows 2.
With a six to twelve month upgrade timeline, providers can build relationships while teams prepare applications 2.