After the United States approved spot Bitcoin ETFs with cash creation and redemption mechanisms in mid-January this year, Hong Kong is also sprinting to launch a similar product.

Although there is still no exact information, it seems that the city will take a different direction than the United States as Bloomberg Intelligence reports that the Hong Kong Securities and Futures Commission (SFC) may allow the creation and redeemed Bitcoin ETFs in kind in the second quarter of this year.

While no spot ETFs have been approved in Hong Kong yet, it's only a matter of time, according to Bloomberg Intelligence ETF analyst Rebecca Sin.

Additionally, Sin reports that the SFC will also allow in-kind buybacks, an important difference from the cash-only buyback regime for similar products in the United States.

In-kind redemptions are a method used more often by ETFs because the underlying assets do not actually need to be sold. It is therefore preferred by investors and issuers for cost, tax and liquidity reasons.

On the other hand, a cash redemption means ETF shares can only be exchanged for cash, leading to tax consequences and a more costly transaction.

Noelle Acheson, author of the newsletter “Crypto is Macro Now,” said that if Hong Kong actually approves an in-kind redemption mechanism for spot Bitcoin ETFs, it would be “huge.”

“The Asian crypto market is much larger than the US crypto market in terms of volume. This could suggest that there is less ‘new money’ pouring into the ecosystem, or it could suggest that there is a deeper understanding of crypto assets in the region.”

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