The Hong Kong Securities and Futures Commission has approved three Bitcoin and Ether spot exchange traded funds. To receive conditional approval and be officially listed, the asset management company issuing the product will apply to the Hong Kong Exchange and the Clearing Authority, the SFC added.
Initial approval was granted to Harvest Global Investments and its partnership with Hashkey Capital and Vocera Asset Management (International), subject to products meeting certain requirements and conditions, according to separate statements from the companies. It is said that China Asset Management's Hong Kong unit also announced that it has received approval from the SFC to provide virtual asset management services and is allocating resources to develop the product. OSL Digital Securities said in a statement that it will provide custody services for the products.
Since the approval of 10 U.S. spot Bitcoin ETFs on January 11, these products have been a hit, with more than $56.2 billion in assets under management, and Bitcoin hit an all-time high in March, according to data from CoinGecko. It reached a high of $73,737.94. Two major Bitcoin ETFs, BlackRock's IBIT and Fidelity's FBTC, are among the top-performing 0.1% of about 5,500 ETFs launched over the past 30 years, according to Bloomberg data.
experts said luck The excitement surrounding this news is inevitable, as Hong Kong is a special administrative region of China, the world's second-largest economy, and all crypto transactions were banned in September 2021. Additionally, a record amount of cryptocurrency trading was banned as a result of the slump in China's stock market. of Chinese money is flowing into overseas stocks. Inflows into 33 onshore ETFs that track foreign benchmarks reached $2 billion in January, the biggest month since late 2020, according to Bloomberg data.
But as the crypto industry is hopeful that Chinese investors looking to gain exposure to banned cryptocurrencies and escape the domestic stock market may soon flood into new Hong Kong ETFs. If so, you might want to reconsider, experts said.
“Officially, mainland Chinese investors can't buy this ETF, even though a lot of people are putting it in their pockets with wealthy local Chinese people,” said Eric Balchunas, senior ETF analyst at Bloomberg. That's because they need to be listed on something called Stock Connect, which allows Chinese nationals to invest in certain Hong Kong ETFs, and vice versa.
“You'll never get this there,” Balchunas says.
Because most foreign investors don't have access to U.S. ETFs, Balciunas believes most of the action will come from domestic retail investors, who will likely see inflows pale in comparison to the U.S. market. It means that. That's because, at the end of the first quarter, the value of Hong Kong's ETF market was about $50 billion (compared to the US ETF market's value of about $8.87 trillion).
Balciunas believes interest in Hong Kong products will be on par with that in the U.S., an ostensibly bullish forecast, but this means Hong Kong products will account for 0.5% to 1% of the total ETF market, or about $500 million to $1 billion. It means there is a possibility. “It's a good additive,” he said, “but numerically, compared to the United States, it's going to be a dime a dozen.”
The world's first Hong Kong Spot Ether ETF provides a case study on how these products work, said Justin Danesan, head of business development for Asia Pacific at crypto money maker Keylock. He said it could offer “a unique proposition” to Hong Kong. If not replicated elsewhere.
“Perhaps SFC wanted to go a step further by providing access to the second-largest cryptocurrency by market capitalization ahead of its US peers,” he added. It will be interesting to see how it is received, i.e. how exactly it is structured and perceived by investors in terms of staking possibilities. ”
These products have in-kind subscription and redemption mechanisms, allowing Bitcoin and Ether tokens to be exchanged for ETF units and vice versa, as opposed to the cash redemption model required by the US alternative. It means possible. This makes the process “inherently cheaper” both from a remittance perspective and on a foreign exchange basis, Danesan said.
