Hong Kong's securities regulator has approved the jurisdiction's first-ever bitcoin index fund designed for institutional investors.

Arrano Capital, the blockchain investment arm of asset management firm Venture Smart Asia, has now met the licensing requirements from the Securities and Futures Commission (SFC) allowing it to begin dealing in cryptocurrency, according to a report by Bloomberg on Sunday. Within the first 12 months, Arrano is hoping to surpass $100 million in total assets under management through a fund tracking bitcoin prices.

The fund marks the first of its kind to have passed regulatory approval on the basis that it solely targets institutional investors. To market to the general public, the fund would have to become an "authorized fund" under Hong Kong rules. Arrano getting the green light potentially paves the way for similar funds to begin filing for licenses in the blockchain-friendly region.

Avaneesh Acquilla, chief investment officer at Arrano Capital, said that while the firm had received approvals for a bitcoin fund, he expected opportunities for other products in the future.

"It shows there are clear guidelines for managers of cryptocurrency funds in Hong Kong," Acquilla told CoinDesk. "While the process is lengthy and detailed as you would expect, we have shown that it is possible to meet these standards."

See also: Hong Kong to Consider Additional FATF-Style Regulations for Crypto Exchanges

"Our next steps are to launch this fund successfully and comply with all of the relevant regulations," he said.

An index fund is a type of mutual fund that was first championed by business magnate Jack Bogle. This type of fund offers a portfolio developed to match or track the components of a financial market index such as the S&P 500. That differs from an exchange-traded fund (ETF), which is an investment fund operating on a stock exchange that provides a stake in assets such as bonds and stocks.

Arrano has a second product planned for launch later in 2020 that would be an actively managed fund dealing with a basket of digital assets, according to Bloomberg.