Hong Kong Welcomes New Crypto ETFs, Potentially Challenging US Dominance
In a move that could shake up the world of cryptocurrency investing, a batch of exchange-traded funds (ETFs) directly investing in crypto made their debut in Hong Kong on Tuesday. These new offerings, which include Bitcoin and Ether ETFs, are expected to provide competition for US Bitcoin products that have seen massive popularity and fueled a record rally in the digital asset.
Harvest Global Investments Ltd., the local unit of China Asset Management, and a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co. are the issuers behind these new ETFs in Hong Kong. The level of demand for these funds will be closely watched as it could indicate whether Hong Kong’s efforts to become a regulated digital asset hub are gaining traction.
While US spot-Bitcoin ETFs have already amassed $52 billion in assets since their launch in January, Bloomberg Intelligence’s Rebecca Sin estimates that Hong Kong’s Bitcoin and Ether funds could attract $1 billion over the next two years. However, Harvest Global’s CEO, Han Tongli, believes this projection is too conservative, citing Hong Kong’s appeal to investors in both the East and the West.
The first trading session for the six new ETFs in Hong Kong saw a combined $11 million in trading volume, a fraction of the $4.6 billion recorded by US spot-Bitcoin products on their debut. Issuers are anticipating around $300 million in combined first-day inflows for the new Hong Kong spot-crypto ETFs, with a focus on Bitcoin funds.
One key factor driving interest in these new ETFs is Hong Kong’s adoption of an in-kind subscription and redemption mechanism, which allows for the exchange of underlying assets for fund units. This approach, according to Harvest Global’s Han, could make the city’s products three times more appealing than the US funds.
Despite lagging behind the US in launching spot-crypto ETFs, Hong Kong’s products are expected to be attractive for their ease of access, especially during Asian trading hours. The market for passive funds in Hong Kong may be smaller, but issuers like Bosera Asset Management (International) are optimistic about the city’s potential in the global virtual-asset sphere.
As digital assets experience a resurgence following a market collapse in 2022, investors will be closely monitoring the performance of these new ETFs in Hong Kong. The launch event for the ETFs saw the Securities and Futures Commission emphasizing that their approval does not signify an endorsement of cryptoassets or crypto investment.
With the crypto market’s volatility in mind, investors will be watching for net inflows into the Hong Kong ETFs to gauge their potential impact on prices. The competition between US and Hong Kong-based crypto products is set to intensify, with both markets vying for a share of the growing interest in digital assets.