4/30/2024

The first BTC and ETH ETFs debuted in Hong Kong

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Key points:

  • Six spot exchange-traded funds (ETFs) for bitcoin and ether debuted in Hong Kong.
  • Three Bitcoin ETFs posted gains of more than 2%, reflecting interest from Asian investors.
  • This is the first launch of spot cryptocurrency ETFs in Asia, coming just three months after a similar event in the US.

Six spot exchange-traded funds (ETFs) for bitcoin and ether made their successful debut in Hong Kong. Three Bitcoin-focused exchange-traded funds posted gains of more than 2%, indicating strong interest among Asian investors in crypto assets.

The event marks a historic moment as it marks the first launch of spot cryptocurrency ETFs in Asia. The debut comes just three months after the launch of the first such Bitcoin ETFs in the United States.

First results from the ETFs’ debut

Spot Bitcoin ETFs from China AMC, Harvest and Bosera were up about 2.6% by midday. Three Ethereum ETFs managed by the same companies showed little change. The price of Bitcoin itself increased by about 1% against the background of this event.

China AMC said its Bitcoin ETF was launched with initial capital of HK$950 million ($121 million), making it the largest among the ETFs issued by the three companies.

It is important to note that cryptocurrencies are prohibited in mainland China. However, Hong Kong is positioning itself as a global hub for digital assets as part of its strategy to maintain its status as a financial center. The ETF launch also puts Hong Kong in direct competition with the US to attract crypto investors.

Spot Bitcoin ETFs in the United States have attracted net inflows of about $12 billion, helping fuel the first cryptocurrency’s price surge earlier this year. However, US regulators have yet to approve spot Ether ETFs.

There is an opinion that Hong Kong has greater potential for the development of crypto assets than the United States, since it can attract investors from both the West and the East. Moreover, according to analysts, in the long term, crypto ETFs could become available to investors from mainland China if these products are proven to be regulated.

Differences between crypto ETFs in Hong Kong and American products

Besides the lack of Ether ETFs in the US, there are other differences between crypto ETFs in Hong Kong and the US.

Hong Kong uses a so-called “in-kind” transaction mechanism that allows investors to buy and sell ETF shares using corresponding crypto tokens instead of fiat money. This approach may be attractive to investors as token holders can consider the benefits of holding through an ETF without the cost of an initial conversion to fiat currency.

But what may be holding crypto enthusiasts back is that management fees for spot ETFs in Hong Kong, ranging from 0.3% to 0.99%, are significantly higher than similar products in the US. This is due to the limited number of regulated service providers under Hong Kong’s strict legal framework.

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