HONG KONG – Six spot Bitcoin and Ether exchange-traded funds (ETFs) gained in their Hong Kong debut on April 30, with the three Bitcoin ETFs climbing more than 3 per cent in early trade, reflecting Asian investor enthusiasm for cryptocurrencies.
The debuts mark the first launch of spot cryptocurrency ETFs in Asia, and come just three months after the US launched its first ETFs to track spot Bitcoin.
Spot Bitcoin ETFs launched by China Asset Management Co, Harvest and Bosera had gained roughly 2.5 per cent as at 2.21am GMT. The three Ether ETFs managed by the asset managers also rose.
Bitcoin climbed about 1 per cent.
Cryptocurrency is banned in mainland China, but Hong Kong has been promoting itself as a global digital asset hub, part of a drive to maintain its allure as a financial centre.
Ms Christina Choi, an executive director of the Securities and Futures Commission (SFC), hailed the product debut as a milestone in Hong Kong’s ETF market, but also flagged risks.
“Virtual assets are quite speculative and very volatile... so I remind you that such assets are not suitable for all investors,” Ms Choi told the launch event.
The ETF launch also put Hong Kong in direct competition with the US for crypto investors. The US spot bitcoin ETFs have drawn roughly US$12 billion (S$16.3 billion) in net inflows, contributing to a surge in Bitcoin’s price earlier in 2024. But US regulators have not yet approved ETFs that track spot Ether prices.
Another difference is that Hong Kong’s crypto ETFs adopt the so-called “in-kind” transaction mechanism that allows investors to buy and sell ETF shares using the relevant crypto tokens instead of cash.
Such an option should be appealing to investors as token owners “may consider the benefit of holding through the ETFs without the cost of first converting to fiat (currency)”, said Mr Robert Zhan, risk consulting director at KPMG China.
Trading in Hong Kong’s crypto ETFs will be watched closely for signs that crypto flows could be drawn to Asia from the US.
Some analysts expect the majority of initial inflow will come from local retail investors, given the cost concerns.
The management fee of the Hong Kong crypto spot ETFs, ranging between 0.3 per cent and 0.99 per cent, is much higher than the current US listed ones, due to the limited number of regulated service providers under the city’s strict legal framework.
Currently Hashkey and OSL are the only two approved trading platforms in Hong Kong.
“If Hong Kong SFC approves more participants or trading platforms in the long run, it will make the costs lower and more competitive,” said Mr Alex Chiu, senior strategist of ETF business at Value Partners.
Bitcoin has gained roughly 50 per cent in 2024 and hit an all-time high of US$73,803 in March. It was trading at around US$62,944 on April 30. Ether has risen nearly 40 per cent year-to-date. BLOOMBERG
