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April 30, 2024

Six Spot Bitcoin and Ether ETFs Debut in Hong Kong, Highlighting the City’s Commitment to Leading the Cryptocurrency Market

In Brief

Hong Kong Stock Exchange introduces six new ETFs on spot bitcoin and ether, solidifying its position as a global leader in virtual assets and preparing for competition with the US.

On April 30, the Hong Kong Stock Exchange welcomed six new ETFs focused on spot bitcoin and ether, setting a landmark moment for the city’s financial sector. As the first exchange in Asia to offer these innovative investment vehicles, Hong Kong has underscored its commitment to establishing itself as a global leader in virtual assets. This move not only solidifies the city’s position on the cutting edge of crypto investment but also sets the stage for competition with the US, which did the same thing earlier in 2024.

Initial Performance and Investor Interest

By lunchtime, gains of over 2% were recorded by the Bitcoin ETFs introduced by China AMC, Harvest, and Bosera Funds, showing substantial attention from investors. The three spot ether ETFs under management by the same asset managers were nearly flat. Nonetheless, the early indications of success suggest that Asian investors are becoming more interested in making crypto assets.

China AMC’s bitcoin ETF started with an initial capitalisation of HK$950 million (about $121 million). Over the course of the trading day, ether saw just a little rise while Bitcoin increased by almost 1%. This strong result highlights the excitement for digital holdings in the area and the build-up to the launch.

The Securities and Futures Commission’s executive director, Christina Choi, referred to the launch as a turning point for the Hong Kong ETF industry. She advised proceeding with prudence, pointing out that although virtual assets provide substantial prospects, they are also quite risky and unstable. This opinion highlights the difficult balancing act authorities must perform when supervising items connected to cryptocurrencies: balancing development with handling risks.

Competing with the United States

In an attempt to keep pace with the US, where spot bitcoin ETFs have already drawn significant funds and helped drive up the price of crypto at the beginning of 2024, they have now been launched in HK. Nonetheless, Hong Kong may have an advantage in this rapidly expanding sector as US authorities have not yet authorised ETFs that follow current prices.

An important distinction between ETFs in Hong Kong and those in the United States is the use of the “in-kind” transaction method. With this method, traders can buy and sell shares with appropriate cryptocurrencies rather than cash, giving them a more economical and versatile choice.

Higher Costs and Limited Platforms

The operating costs for the HK ETFs, which range from 0.3% to 0.99%, are greater than those of the U.S., some experts warn, despite the excitement. This discrepancy is explained by the tiny proportion of suppliers who are subject to Hong Kong’s strict legislative environment. At the moment, the city is home to just two authorised exchange networks: Hashkey and OSL.

Regulatory Framework and Future Outlook

Although the introduction of spot bitcoin and ether ETFs in Hong Kong is a noteworthy advancement, the authorities in the city are still working on creating an adequate structure for stablecoins and other virtual holdings. Individual investors may now be able to purchase funds that are entirely invested in digital assets, according to the SFC, which may encourage more fund managers to submit applications.

Harvest Global CEO Han Tongli highlighted that one of Hong Kong’s advantages over the US is its financial strategy. According to him, Hong Kong’s cutting-edge ETFs demonstrate the city’s dedication to promoting development in the virtual asset sector while also offering shareholders a straightforward starting point. This viewpoint is consistent with Hong Kong’s overarching plan to preserve its appeal as an economic hub.

The innovative crypto ETFs issued by Hong Kong may encourage other countries to accept crypto as assets and encourage broader use of virtual money. Hong Kong has the potential to be a leader in the crypto space in Asia with its tactical strategy and dedication to striking a balance between development and compliance with laws.

Disclaimer

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About The Author

Viktoriia is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.

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Viktoriia Palchik
Viktoriia Palchik

Viktoriia is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.

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