Hong Kong Set to Launch Spot ETFs tied to Bitcoin and Ether Cryptocurrencies
Summary:
Hong Kong will embark on spot exchange-traded funds (ETFs) trading linked to physical Bitcoin and Ether cryptocurrencies. The launch involves three Chinese firms - China Asset Management, Bosera Asset Management and Harvest Global Investments. The Hong Kong ETF market has already experienced the introduction of futures-based Bitcoin ETFs. In this new strategic shift, ETF redemption will be in-kind, with creation of new ETF shares using actual cryptocurrencies, unlike the U.S. which requires cash. The future expectation is that assets under management for Hong Kong's spot crypto ETFs could reach $1 billion in 1-2 years. However, mainland Chinese citizens are likely to be excluded from participating, due to China's restrictions on crypto-related activities.
The world of cryptocurrency is abuzz with anticipation over a major event set to take place tomorrow: the commencement of trading for spot exchange-traded funds (ETFs) linked to physical Bitcoin (BTC) and Ether (ETH) cryptocurrencies. This trading is set to begin in Hong Kong and has been initiated by three Chinese firms - China Asset Management, Bosera Asset Management, and Harvest Global Investments, which are due to launch their crypto ETFs via their Hong Kong branches on the Hong Kong Stock Exchange (HKEX) on April 30. This occurrence will represent another landmark in the evolution of regulated crypto investment products and ETFs worldwide, mirroring the unprecedented event of the spot Bitcoin ETFs launched in the United States in January 2024. With the countdown on for the ETFs' Hong Kong launch, a rundown of key facts about what awaits has been compiled.
HKEX is not a stranger to Bitcoin futures and other crypto contracts. Firstly, spotlight crypto ETFs aren't new to the Hong Kong ETF market or to HKEX. In fact, crypto ETFs debuted on HKEX in late 2022 with the launch of the cash-settled CSOP Bitcoin Futures ETF and the CSOP Ether Futures ETF, both managed by CSOP Asset Management. Next, Samsung Asset Management Hong Kong introduced another futures-centric Bitcoin ETF, the Samsung Bitcoin Futures Active ETF in January 2023. On April 29, 2024, assets under management for these three HKEX futures crypto ETFs reached the 1.3 billion Hong Kong dollars ($170 million) mark, as per HKEX data.
Comparatively, while Hong Kong's ETF market might seem significant at first glance, it pales compared to the U.S. ETF market. The US ETF industry boasts 3,457 products, valued at a total of $8.9 trillion, listed across three separate exchanges, as per ETFGI data up until the end of March 2024. In stark contrast, Hong Kong's ETF market is estimated to be worth $50 billion, based on data supplied by Bloomberg analyst Jack Wang. In June 2019, Hong Kong's maiden first active ETF was listed on HKEX. By the close of 2023, 24 active ETFs were listed on HKEX, commanding a combined capitalization of 8.6 billion HKD ($1 billion). In 2023 the Chinese ETF market was estimated at $238 billion according to Bloomberg.
There is a notable difference between the in-kind crypto ETFs in Hong Kong and the cash-create ETFs in the U.S. Aside from the monthly statements, Hong Kong's spot crypto ETFs have one major difference from those found in the United States. This distinction revolves around how ETFs are redeemed. Unlike their US counterparts, HKEX's spot crypto ETFs will be in-kind created, meaning that when new ETF shares need to be manufactured, actual cryptocurrencies are used. However, U.S. sot Bitcoin ETF providers are currently only able to issue cash-created spot crypto ETFs, meaning intermediaries are not allowed to interact with Bitcoin.
Hong Kong will not be home to the world's first spot Ether ETF. The impending launch has implications beyond Hong Kong; it will also see the arrival of not only in-kind spot cryptocurrency ETFs but also a spot Ether ETF. This is something that has not yet launched in the U.S. Despite this, Hong Kong's spot Ether ETF isn't the world's first. In April 2021, Canadian regulators greenlit the first Ether futures ETFs in the country, becoming one of the earliest countries to debut such products. According to Nasdaq, Canada currently has five Ether ETFs: Purpose Ether ETF, Evolve Ether ETF, CI Galaxy Ethereum ETF, 3iQ CoinShares Ether ETF and Fidelity Advantage Ether ETF.
Mainland China investors will not be able to participate in Hong Kong Bitcoin ETFs despite the launch of spot crypto ETFs. Wang from Bloomberg stated that, China prohibits its citizens from any activity related to crypto, indicating that investment in crypto ETFs is also off-limits. Despite the ETF issuers' connection with mainland China, it is expected that mainland Chinese citizens will be unable to invest in Hong Kong's spot crypto ETFs.
China AMC leads the pack among the three spot crypto ETF issuers in Hong Kong in terms of assets under management (AUM). It is the Hong Kong branch of China Asset Management and currently manages 15 ETFs in Hong Kong, boasting a total AUM of $3.6 billion. Hong Kong's spot crypto ETFs could reach $1 billion AUM in one to two years, according to Wang. Other issuers, Bosera and Harvest, manage $40 million and $16 million in AUM, respectively.
The news closes with Gordon Goner discussing his intense health struggles and Bored Apes reaching their third anniversary.
Published At
4/29/2024 2:56:36 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.