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Hong Kong Sets Green Light For Bitcoin And Ether Spot ETFs

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Hong Kong gave the green light to several Bitcoin and Ether spot ETFs (exchange-traded fund) on April 15, marking a significant step in its ambitions to become a top crypto center in the region. On that Monday, major offshore Chinese asset managers including China Asset Management and Harvest Global Investments announced that the Hong Kong Securities and Futures Commission (SFC) approved their applications to offer these products.

China Asset Management’s Hong Kong branch plans to launch spot Bitcoin and Ether ETFs with the assistance of OSL and BOCI International. OSL will serve as the primary trading and custody partner, ensuring secure and reliable management of the ETFs’ underlying assets.

OSL leverages its robust infrastructure to provide a secure trading environment essential for the ETF’s operation, managing the underlying assets with precision and reliability,

OSL stated.

Similarly, Harvest Global Investments also received approval to issue two spot crypto ETFs. They are partnering with OSL to deal with challenges like high margin requirements and to strengthen the operational safety of these financial products. On the same note, Bosera Asset Management partnered with HashKey Capital announced their conditional approval to launch a Bitcoin ETF and an Ether ETF, which are expected to accept subscriptions directly in Bitcoin and Ether.

Strengthening Hong Kong’s Status as a Financial Center

However these spot crypto ETFs hasn’t been launched, they still expand investment options and boosts Hong Kong’s role as an international finance hub and a center for digital assets. Unlike mainland China, where crypto trading has been banned since 2021, Hong Kong has welcomed crypto businesses with open arms since last year when it began its crypto licensing regime, allowing licensed exchanges to provide services to retail investors.

Adrian Wang, CEO of Metalpha, believes that the Ether ETFs might be particularly influential.

Investors have options to gain Bitcoin exposure through bitcoin-related stocks like mining companies, but there are no ETH-related stocks as of now,

Wang explained. Angela Ang, a former regulator and now a senior policy advisor at TRM Labs, commented on the timing of Hong Kong’s approval,

Hong Kong’s approval of the spot Ether ETFs comes ahead of a US decision, and is a significant milestone in Hong Kong’s journey to become a leading crypto hub

The Securities and Futures Commission of Hong Kong is reportedly finalizing the approval process, with an official announcement expected soon. This development demonstrates Hong Kong’s ambition to become a leading force in the Asian cryptocurrency market​.

Hong Kong Approved Spot ETFs - SFC
Picture: The Securities and Futures Commission | Source: The Standard

The upcoming ETFs will utilize an ‘in-kind creation model’, which facilitates the actual exchange of cryptocurrencies in the creation and redemption processes. This approach is expected to reduce costs and improve liquidity, which is a notable advancement over traditional ETF structures​.

Moreover, these developments align with regulatory improvements, including new regulations for virtual asset service providers aimed at strengthening investor protection. There’s also a significant potential for attracting Chinese investors through the Southbound Stock Connect program (which is a cross-boundary investment channel that connects the Shanghai and Shenzhen stock exchanges with the Hong Kong Stock Exchange), with expectations reaching up to $25 billion​.

With the U.S. still undecided on allowing spot Ether ETFs, Hong Kong’s move could potentially unlock global investor interest, according to Patricia Ho, general counsel of Scroll network. She thinks Hong Kong overtook the U.S., as the first global financial hub to authorize spot Ether ETFs:

I believe this will unlock pent-up global investor interest and drive more funds to set up to issue Hong Kong Ether spot ETFs.

Overall, these developments underline Hong Kong’s proactive approach to welcoming the cryptocurrency industry with open arms and positioning itself at the financial forefront by integrating innovative financial products that cater to the evolving needs of global investors. And we think the timing is very opportune given the SEC’s approval of spot bitcoin ETFs in the U.S. in January, as it closely matches the impending Bitcoin halving event (in April 2024). These simultaneous developments could be very positive for each other, potentially leading to a significant influx of capital into the market.


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