In an eagerly anticipated launch, six spot bitcoin and ether exchange traded funds (ETFs) made their debut in Hong Kong on Tuesday, marking a significant milestone in the region’s financial landscape. The enthusiasm among Asian investors for cryptocurrency assets was evident as three bitcoin ETFs surged over 2% by midday.
Led by China AMC, Harvest, and Bosera, the spot bitcoin ETFs exhibited robust performance, with gains of approximately 2.6% recorded by the midday break. In contrast, the three ether ETFs, also managed by leading asset managers, maintained relatively stable performance.
The debut of these ETFs represents a significant development as they are the first spot cryptocurrency ETFs to launch in Asia, arriving just three months after the United States introduced its inaugural ETFs to track spot bitcoin prices.
China AMC, boasting the largest initial size of HK$950 million ($121 million) among the three issuers, underscored Hong Kong’s emergence as a global digital asset hub, despite cryptocurrency being banned in mainland China. Hong Kong’s proactive stance in promoting itself as a financial center aligns with its aspirations to cater to evolving investor preferences and remain competitive on the international stage.
Christina Choi, Executive Director of the Securities and Futures Commission (SFC), acknowledged the milestone achieved by Hong Kong’s ETF market while cautioning investors about the speculative and volatile nature of virtual assets. Choi emphasized that such investments may not be suitable for all investors, urging caution and due diligence.
The launch of these ETFs positions Hong Kong in direct competition with the United States for crypto investors. While U.S. spot bitcoin ETFs have garnered approximately $12 billion in net inflows, driving a surge in bitcoin’s price earlier this year, regulatory approval for ETFs tracking spot ether prices in the U.S. remains pending.
Han Tongli, CEO of Harvest Global Investments, expressed optimism about Hong Kong’s potential to outshine the U.S. in developing crypto assets, leveraging its strategic position to attract investors from both Western and Eastern markets. He emphasized the long-term potential for mainland Chinese investors to access crypto ETFs, contingent upon effective risk management measures.
A notable feature distinguishing Hong Kong’s crypto ETFs from their U.S. counterparts is the adoption of the “in-kind” transaction mechanism, allowing investors to trade ETF shares using crypto tokens instead of cash. This option, perceived as advantageous by some analysts, may appeal to investors seeking to mitigate conversion costs.
Despite the higher management fees ranging from 0.3% to 0.99% for Hong Kong’s crypto spot ETFs compared to their U.S. counterparts, industry experts anticipate significant initial inflows from local retail investors. The limited number of regulated service providers and trading platforms in Hong Kong contributes to the higher costs, but potential future expansions could enhance competitiveness.
As bitcoin continues its upward trajectory, gaining approximately 50% this year and trading around $63,000 on Tuesday, and ether witnessing a 40% year-to-date increase, the successful debut of these ETFs underscores Hong Kong’s growing prominence in the global cryptocurrency landscape.
