7 months ago
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The launch of the ETFs next week in Hong Kong will likely draw comparisons with the three-month-old US Bitcoin funds, which have already made a significant impact on Wall Street.
Hong Kong is on the brink of introducing its crypto-based exchange-traded funds (ETFs) for trading. According to a recent Bloomberg report citing people familiar with the matter, the country’s spot Bitcoin (BTC) and Ethereum (Ether) ETFs will debut on exchanges early next week.
The new developments follow Hong Kong’s approval of several crypto ETF applications on April 15, 2024. Chinese financial services companies such as China Asset Management and Bosera Capital, through their Hong Kong subsidiaries, obtained approval from the Securities and Futures Commission (SFC) to offer their customers new investment products.
Hong Kong to Begin Trading ETFs by April Ending
Bloomberg said that these companies are already in the final stages of preparation to commence trading for the crypto investment vehicles by the end of April.
Investors in the Asian market will soon have access to both BTC and Ether through these ETFs, allowing them to invest in the two leading cryptocurrencies without directly engaging with the digital asset market.
The ETF boom began in January when the US Securities and Exchange Commission (SEC) approved 11 applications submitted by asset managers like BlackRock, Grayscale Investments, Fidelity Investments, ARK 21 Shares, and Invesco Galaxy.
With the US leading the way, Hong Kong has joined the trend, paving the way for investors in the Asian region to explore the crypto economy.
However, unlike Bitcoin ETFs in the US, which are structured for cash redemption, Hong Kong’s crypto ETFs will utilize an in-kind subscription and redemption model. This approach allows for the direct exchange of underlying assets for ETF units and vice versa.
Potential Inflows vs Expectations
Bloomberg’s report suggested that the launch of the ETFs next week in Hong Kong will likely draw comparisons with the three-month-old US Bitcoin funds, which have already made a significant impact on Wall Street. The US ETFs have already accumulated a total of $56 billion in assets, and the crypto community anticipates that Hong Kong’s ETFs will achieve similar success if mainland Chinese investors are allowed to participate in the market.
Last week, Coinspeaker reported that Alessio Quaglini, the CEO of Hex Trust, a crypto custodian firm, said there is a chance Chinese investors might have access to Hong Kong’s crypto ETFs due to unclear regulations regarding these funds in the country.
Analysts speculate that if Chinese investors are able to participate, the ETFs could attract a massive inflow of around $25 billion.
However, Bloomberg’s ETF expert, Eric Balchunas, believes that Hong Kong might realistically see inflows of up to $500 million, considering the SFC has yet to approve ETFs from major asset management giants like BlackRock.
Bloomberg also noted that the amount of funds generated from these crypto ETFs will indicate Hong Kong’s progress toward becoming a leading financial hub for cryptocurrencies.
The country, along with Dubai, Singapore, and the United Kingdom, is competing to become a hub for modern financial innovations.
