Hong Kong joins global crypto ETF competition

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Hong Kong's first spot crypto exchange-traded fund (ETF) began trading on Tuesday, as Asia's financial hub takes on the United States for supremacy in the growth market.

The development follows the launch of similar products in the U.S. in January by groups including BlackRock and Fidelity Investments, with both groups attracting billions of dollars in investments, and Bitcoin in March. This helped push the price to an all-time high of more than $73,000.

The Hong Kong units of three mainland Chinese asset management companies (Bocera Asset Management, Harvest Global Investments and China Asset Management) each launched two ETFs that track the price of Bitcoin and Ethereum. The Bosera fund was launched in partnership with his HashKey Capital.

The three Bitcoin ETFs closed their debut trading up 1.5% to 1.8%, while the Ether ETF fell 0.5% to 0.8%. The total trading volume of the six ETFs, including trading in US dollar, Hong Kong dollar and Renminbi, was approximately HK$99.5 million (US$12.7 million). The trading volume of US funds on the first day of trading exceeded $4 billion.

Hong Kong has announced it aims to become a cryptocurrency hub in 2022, after years of pandemic restrictions and Beijing's tightening grip on Hong Kong tarnished its image as a global financial center.

“This is the first time that a virtual asset spot product will be launched in the Asian market…” Joseph Chan, Hong Kong's deputy minister of financial services and finance, said at the listing ceremony of the six funds on Tuesday morning.

CSOP Asset Management launched Hong Kong's first Bitcoin and Ether futures ETF in late 2022, and the Securities and Futures Commission announced rules for spot ETFs in December.

In January, the US Securities and Exchange Commission approved the country's first spot Bitcoin ETF. BlackRock's iShares Bitcoin Trust has more than $17 billion in assets under management, backed by billions of dollars in net inflows this year and a surge in digital asset prices, according to Bloomberg data.

The 11 U.S.-based Spot Bitcoin ETFs have collectively attracted about $12 billion in net inflows since their inception, according to London-based Pharcyde Investors.

Robert Zhang, director of risk consulting at KPMG China, said the most optimistic forecast is for Hong Kong funds to see net inflows of more than $3 billion.

However, Zhang said the relatively flat price of Ether and Bitcoin leading up to the ETF's launch suggests the goal may be unrealistic given current market sentiment. He added that there is. Bitcoin and Ether prices each fell about 1% in the hour after the fund went public on Tuesday morning.

Still, despite Beijing's strict crypto regulations and warnings from mainland authorities and state media against trading digital assets, the launch of a crypto-linked fund by three of China's largest mainstream asset managers has generated excitement within the industry. called.

Although China banned all crypto trading in 2021, a significant number of investors still use workarounds such as virtual private networks to conduct crypto trading.

Donald Day, chief operating officer of Hong Kong-based digital asset exchange VDX and former regulator of the city's SFC, said the fund cannot or would not be traded during U.S. business hours. He said it can cater to active investors.