Australia and Hong Kong Lead Expanding Crypto ETF Market
Summary:
Australia and Hong Kong are emerging as leaders in the cryptocurrency market for exchange-traded funds (ETFs), with Monochrome Asset Management and VanEck launching the first Bitcoin ETFs in Australia, following the introduction of six Ethereum and Bitcoin ETFs in Hong Kong. As the crypto ETF market expands, these pioneers aim to capture the Asian market, with strategic plans for long-term expansion. Despite different regulatory approaches, both markets expect growth in assets and are seen as very promising for the further advancement of the crypto sector.
Bitcoin's market in exchange-traded funds (ETFs) is becoming more massive, with Australia and Hong Kong taking the lead this June, right after Hong Kong introduced six Ethereum and Bitcoin ETFs last April. As the crypto ETF market develops, Australia and Hong Kong appear to be in tight competition in the fight for market dominance. Monochrome Asset Management distinguishes itself as Australia's pioneer BTC ETF that directly holds Bitcoin, having launched on the Cboe on June 4. On June 20, the second one, VanEck, kicked off as a subsidiary of its US counterpart on the Australian Securities Exchange (ASX), and more are yet to come.
These ETFs are on foreign exchanges with fairly easy access, depending on their platform. However, the primary objective is conquering the Asian market. Both Australian and Hong Kong ETF providers are preparing broad, long-term expansion strategies. Monochrome, from Australia, is setting its sights on the entire Asian region – areas where local institutions probably wouldn't have enough volume to warrant the expenses of initiating and managing an autonomous product. Hong Kong plans to tap into the gigantic market in Mainland China. Being the early birds, these providers have a head start and are likely to command the market in the short term. Singapore is excluding itself from this race for now. It's possible that Japan and South Korea's regulators might allow crypto ETFs, but due to strict capital rules in Korea, their potentials are only domestic.
This likely duel between Hong Kong and Australia will focus initially on growing assets domestically. This process will undoubtedly take more time compared to the US counterparts, which racked up $4.6 billion on their debut day, January 11, with currently almost $30 billion in Assets Under Management (AUM).
Despite the hype prior to their launch, the flow of funds into Hong Kong's ETFs has not met expectations. However, the fault might be on the hype rather than the products. Although the ETF market in Asia has seen an average growth rate of 20% over the past decade, Asian investors' preference for ETFs is still not as strong as in the US. The seven leading APAC markets' total ETF AUM equals only 4% of their combined market cap, in contrast to the US, where the ETF AUM is 16% of the total market. However, the CEO of London-based CF Benchmarks predicts that crypto ETFs in Hong Kong will reach $1 billion in AUM by the end of 2024.
There are strategic differences between the crypto ETFs markets in Australia and Hong Kong. Hong Kong, a globally recognized financial hub, has more institutional investor-centric activities. It has fewer regulated exchanges and innovators. Unlike the US, where the regulator was somewhat reluctant due to the high demand for crypto ETFs, the Hong Kong regulator actively encouraged the creation of ETFs. The probable long-term goal is for Mainland China's investors to access Hong Kong's ETFs via the Hong Kong China Stock Connect, a bridge that allows investors in Mainland China and Hong Kong to invest in each other's investment products listed on their respective security exchanges. If the initial plans to include crypto ETFs come to fruition, the market could get more competitive with more providers coming into the Hong Kong market.
In Australia, there's a healthier appetite for ETFs in general and a good balance of crypto exchanges, retail and institutional investors, and gaming companies and fintech platforms innovators.
The Australian regulator has reacted more passively, responding to demand and industry trends and providing a custody system that safeguards consumers and gives clarity on how regulated businesses should consider infrastructure. Australian crypto ETFs aim to capture as much professional and institutional Aussie flow. If Monochrome - the only Australian listed instrument in good standing under ASIC's retail crypto asset licensing rules that directly holds spot Bitcoin - successfully deploys its strategy, it will use its position among other local feeder Bitcoin ETFs as a master fund for feeder funds in other countries in the region.
In Australia, the market is smaller than half of Hong Kong's, but there exists a more vibrant interest for ETFs in general with a good mix of crypto exchanges, retail and institutional investors, and innovators from gaming companies and fintech platforms.
Hong Kong could viably support crypto ETFs as a substantial standalone market. Australia's market is relatively smaller yet could still remain viable.
This exciting transition will spur innovation and differentiation in the market, providing many learning opportunities as the market evolves.
Published At
6/27/2024 11:23:35 PM
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