Hong Kong regulators today gave the green light to the launch of Spot Bitcoin and Ethereum exchange traded funds (ETFs). Fund managers including China Asset Management (Hong Kong) Limited, Vocera Asset Management (International) Company and Harvest Fund Management all announce confirmation that they have received conditional approval from Hong Kong's financial regulator. did.
The Hong Kong Securities and Futures Commission's (SFC) decision to approve Bitcoin and Ethereum spot ETFs follows a similar move in the US earlier this year, making Hong Kong the second such move in the world after the US. Become the jurisdiction in which the product will be introduced.
Hong Kong crypto ETFs are characterized by their comprehensiveness and investor-friendly features, offering both Bitcoin and Ethereum spot ETFs and in-kind redemption permissions. In contrast, Bitcoin ETFs approved by US regulators only support stock redemptions that convert the underlying cryptocurrency into cash for redemption.
Conditional approval by Hong Kong SFC
China Asset Management has partnered with Hong Kong-based cryptocurrency exchange OSL on ETF products, with China's CITIC International acting as the custodian.
Harvest Management has also selected OSL as its primary crypto asset trading platform and custodian partner, while Bosera International is collaborating with Hong Kong cryptocurrency company HashKey Capital on co-issuance and management.
As of December last year, the Hong Kong Securities and Futures Commission issued a circular on virtual assets, proposing to accept applications for virtual asset spot ETFs.
Since then, more than 20 financial institutions have begun preparations for a cryptocurrency spot ETF market, with some institutions submitting applications as early as January.
On April 10, Reuters reported that a Bitcoin Spot ETF could be launched in Hong Kong this month, with the first approval announcement potentially coming as early as next week.
Following today's issuance of the first conditional approval group, it is expected that the Bitcoin Spot ETF will be launched within approximately 10 days, potentially around the end of April.
According to the official website of the Hong Kong Securities and Futures Commission, there are currently 18 institutions on the list of Hong Kong virtual asset management funds.
Among them, ChinaAMC and Harvest Global Investments obtained Crypto Asset License No. 9, allowing them to invest 100% in crypto assets, independently manage their portfolios, and issue autonomously.
Vocera Funds and Value Partners Group do not yet have independent licenses, so they will need to seek cooperation with licensed exchanges or other institutions to jointly issue a crypto ETF.
Hong Kong Spot Bitcoin and ETH ETFs now available for physical redemption
While most ETFs primarily utilize an in-kind redemption process and do not require the sale of the underlying assets, Bitcoin ETFs authorized in the US require the ETF to sell the underlying assets for cash for redemption. there is.
In-kind redemptions typically provide faster liquidity and price response, and issuers can reduce risk liability and enjoy more operational convenience.
Hong Kong's approval includes Ethereum ETFs in addition to Bitcoin ETFs. The US has not approved the Ethereum Spot ETF.
These features of future Hong Kong spot crypto ETFs may make them attractive to certain investors.
What does the future hold for crypto spot ETFs in Hong Kong?
Hong Kong's cryptocurrency market currently remains relatively small compared to major exchanges like Coinbase and Binance, which list 246 and 390 cryptocurrencies, respectively. HashKey Exchange, a leading cryptocurrency platform in Hong Kong, only lists 21 cryptocurrencies.
In Hong Kong, OSL and HashKey are the only two crypto trading platforms with crypto asset licenses No.1 and No.7. HashKey's custody business has been operating steadily for more than a year, and his custody assets exceed US$2.2 billion. In contrast, as of Q4 2023, even before the introduction of spot ETF products, Coinbase had $101 billion in year-end assets under custody.
Despite facing challenges such as high licensing costs, limited currency listings, and low offshore competitiveness, both OSL and HashKey are poised to take advantage of new growth opportunities from ETFs. Custody and transaction fees are expected to rise.
Both crypto exchanges and brokerages in Hong Kong are still in their infancy. With over 20 financial institutions rushing to seize this opportunity and over 60 brokerages entering the crypto ETF market, Hong Kong could see significant growth if these products launch successfully. There is sex.
After the US approved the world's first group of Bitcoin Spot ETFs in January, Spot Bitcoin Exchange Traded Funds (ETFs) accumulated net inflows of approximately USD 12.1 billion by the end of the first quarter, with total assets of all products The total amount was USD 54 billion. .
What does this mean for Hong Kong's crypto market?
In recent years, Hong Kong has sought to establish itself as a regulated crypto hub, with financial regulators actively working to establish the necessary regulations for healthy development.
This latest effort comes against the backdrop of a major crackdown in 2021 that effectively banned cryptocurrency trading in mainland China. Last June, Hong Kong added to the debate over cryptocurrency regulation by introducing new regulations aimed at promoting the growth of the local cryptocurrency market. Over-the-Counter (OTC) Market.
However, these efforts faced challenges such as limited funding channels and market capacity, and incidents of fraud that undermined public perception of the sector. The approval and launch of a Spot Bitcoin ETF in the US in January further highlights the sense that Hong Kong is being left behind, as other regional centers such as Singapore and Dubai gain influence in the crypto space. I made it.
More than 220 Web3-related companies from dozens of countries and regions have set up offices in Hong Kong, according to Hong Kong regulatory disclosures. However, due to space and cost limitations, most of these companies have established operational or technical departments with only a few employees.
Approval of Bitcoin and Ethereum spot ETFs could expand investment channels, lower regulatory hurdles and further facilitate the migration of traditional capital into Hong Kong's crypto space. The move is expected to inject new vitality into the development of Hong Kong's Web3 industry and enhance its reputation as an open player in the global cryptocurrency industry.
