Jai Sahu
Hong Kong is poised to introduce its highly anticipated spot Bitcoin and Ethereum exchange-traded funds (ETFs) by the end of April.
According to Bloomberg, the Bosera-HashKey Capital spot ETFs are scheduled to commence trading on April 30.
The Hong Kong Securities and Futures Commission (SFC) has recently authorized several fund managers to offer these ETFs, aiming to position the city as a central hub for digital assets by introducing a variety of cryptocurrency ETFs.
Chinese asset managers are also gearing up to launch spot Bitcoin and Ether ETFs, paralleling the enormously successful three-month-old US Bitcoin funds, which have already amassed $56 billion in assets.
Chinese Investors Might Show Interest in Hong Kongโs ETFs
Potential demand for Hong Kongโs spot crypto ETFs could arise from Chinese wealth invested in the city, along with Asia-Pacific crypto exchanges and market makers.
Bloomberg Intelligence ETF Analyst Rebecca Sin estimates that these funds might gather $1 billion in assets under management within the next two years.
The US-based Bitcoin funds managed by major firms like BlackRock Inc. and Fidelity Investments have generated widespread interest and attracted substantial investments.
However, the prospective Hong Kong issuers, including Harvest Global Investments Ltd. and a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co., may not enjoy the same level of recognition.
๐ฐ Giant #Bitcoin Spot ETF ads spotted in Hong Kong ๐ญ๐ฐ pic.twitter.com/7RTzg5fxsj
— The Crypto News ๐๏ธ (@TCNCRYPTO) April 15, 2024
Roger Li, co-founder of One Satoshi, a Hong Kong-based chain of stores offering cash-to-crypto conversions, suggested to Bloomberg that expectations for ETF demand should be tempered given the cityโs smaller financial sector.
The US Securities and Exchange Commission has cautiously approved ETFs that invest directly in Bitcoin earlier this year but remains wary of cryptocurrencies due to market volatility and past fraud incidents.
Approving ETFs for Ether, the second-largest digital asset, will likely pose additional challenges.
In contrast, Hong Kong has initially approved spot-Bitcoin and Ether ETFs, uniquely featuring an in-kind subscription and redemption mechanism that the HashKey Capital and Bosera offerings will employ.
This mechanism enables the direct exchange of underlying assets for ETF units, enhancing efficiency and arbitrage opportunities compared to the cash redemption model used by US funds.
Hong Kong Offers Futures-Based ETFs
The city already allows crypto futures-based ETFs, and a stablecoin framework is also under development.
The success of Hong Kong as a crypto hub is yet to be determined, but the forthcoming ETF launches are well-timed with Bitcoinโs significant rally over the past year, drawing considerable interest from Bitcoin enthusiasts.
However, it will take some time for the virtual asset ETF infrastructure to fully mature, paving the way for more participants, increased liquidity, and better market conditions.
As digital assets continue to rise in popularity in China, amid a mixed outlook for stocks and a struggling real estate sector, the demand for cryptocurrencies remains robust.
However, crypto trading remains banned on the mainland, leading to clandestine activities, and the upcoming fund launches in Hong Kong are likely to be inaccessible to Chinese investors trying to access Hong Kong ETFs through specific programs.