In a notable development for crypto investing in Asia, six new bitcoin and ether spot exchange-traded funds (ETFs) saw gains in the opening session in Hong Kong today. In particular, three bitcoin ETFs were up more than 2% by midday. The event marks a major milestone as it represents Asia's first foray into spot cryptocurrency ETFs, following the United States, which introduced the first spot bitcoin ETFs three months ago. before.
Managed by China AMC, Harvest and Bosera, bitcoin ETFs were up about 2.6% at the lunch break. Meanwhile, three ether ETFs, also managed by these asset managers, were largely unchanged. Bitcoin itself experienced a modest gain of around 1% on the day.
China AMC's bitcoin ETF launched with an initial size of HK$950 million ($121 million), making it the largest of the newly launched funds. Despite the cryptocurrency ban in mainland China, Hong Kong is positioning itself as a global digital asset hub, aiming to maintain its status as a leading financial center.
At the launch event, Christina Choi, chief executive of the Securities and Futures Commission (SFC), celebrated the launch of these products as an important moment for the Hong Kong ETF market. Kong but also warned investors about the risks, emphasizing the speculative and volatile nature of virtual assets and advising that they may not be suitable for everyone.
The launch of these ETFs positions Hong Kong as a direct competitor to the United States in the cryptocurrency investor market. In the US, spot bitcoin ETFs attracted about $12 billion in net inflows, which helped boost bitcoin prices at the start of the year. However, US regulators have yet to approve ETFs that track spot prices for ether.
Han Tongli, CEO of Harvest Global Investments, expressed optimism about the initial capital inflow, suggesting that Hong Kong could overtake the United States in crypto asset development due to its appeal to investors. investors from both the western and eastern hemispheres. Han also speculated that these ETFs could eventually become accessible to mainland Chinese investors if they can demonstrate controllable risks.
A special feature of Hong Kong's cryptocurrency ETF is the adoption of an "in-kind" trading mechanism, allowing investors to trade ETF shares using actual cryptocurrency tokens instead of cash. This could appeal to investors who prefer to hold their investments in ETFs without converting to fiat currency, notes Robert Zhan, director of risk consulting at KPMG China.
However, higher management fees for Hong Kong crypto spot ETFs, ranging from 0.3% to 0.99%, may initially limit their appeal mainly to local retail investors. These fees are higher than for US ETFs, due to the limited number of service providers regulated within Hong Kong's strict regulatory framework. Currently, Hashkey and OSL are the only two approved exchanges in the city, but have the potential for more competitive pricing if the SFC approves more participants or platforms in the future, according to Alex Chiu, strategist Senior strategist at Value Partners.
Bitcoin has seen a significant increase of around 50% this year, reaching an all-time high of $73,803 in March and trading around $63,000 today. Ether has also performed well, with gains of nearly 40% year-to-date. The exchange rate used for conversion in this report is $1 to 7.8253 Hong Kong dollars.
