Hong Kong is gearing up to offer a series of cryptocurrency exchange-traded funds (ETFs), aiming to replicate the success seen in the U.S. This move sheds light on Hong Kong’s journey to establish itself as a cryptocurrency asset hub. According to a spokesperson from HashKey, spot Bitcoin and Ethereum ETFs could be launched by April 30. While Hong Kong seems to be following the U.S. at this point, it appears to be taking the lead with the spot Ethereum ETF.
Hong Kong Takes a Significant Step
China’s leading asset managers have reached the final stages of introducing spot Bitcoin and Ethereum ETFs, set to trade by the end of April. Accordingly, the ETFs are planned to start on April 30. These launches are expected to be compared to the rapid success of U.S. Bitcoin funds, which gathered $56 billion in assets within three months.
For over a year, Hong Kong has been competing with global counterparts like Singapore and Dubai to create a well-regulated environment for the cryptocurrency asset industry. This development aims to rejuvenate Hong Kong’s status as a modern financial hub.
Significant Flow Expected
The demand for these upcoming ETFs will serve as an indicator of Hong Kong’s progress in this sector. Potential sources of demand include wealth held in Hong Kong from China, as well as active cryptocurrency exchanges and market makers in the Asia-Pacific region.
Bloomberg Intelligence ETF Analyst Rebecca Sin estimates that these funds could accumulate $1 billion in assets under management within two years.
Challenges Compared to the U.S.
However, unlike their U.S. counterparts such as BlackRock Inc. and Fidelity Investments, Hong Kong’s prospective issuers lack global recognition. The absence of the “BlackRock effect,” considering Hong Kong’s smaller financial sector, could lower expectations for ETF demand.
While the U.S. Securities and Exchange Commission reluctantly allows ETFs to invest directly in Bitcoin, Hong Kong has given initial approval for spot Bitcoin and Ethereum funds. Additionally, the in-kind subscription and redemption mechanism proposed by HashKey Capital and Bosera offers efficiency and arbitrage opportunities, unlike the cash redemption model in the U.S.
According to a HashKey spokesperson, Bosera-HashKey Capital’s spot products are scheduled to start trading on April 30. Although Hong Kong has significantly lower total assets compared to U.S. offerings, it already permits ETFs based on cryptocurrency futures.
