Tech
Hong Kong’s Bitcoin and Ether ETFs see tepid trading on debut as the city looks to strengthen the virtual asset market
Asia’s first Exchange Traded Funds (ETFs) investing directly in bitcoin and ether began trading in Hong Kong on Tuesday with early gains in morning trading, marking a significant step in the city’s effort to become a cryptocurrency hub.
Six spot cryptocurrency ETFs investing in the world’s two largest cryptocurrency tokens have debuted on the Hong Kong exchange, launched by mainland Chinese fund managers ChinaAMC, Harvest International and Bosera Asset Management, which is partnering with HashKey Capital’s arm Hong Kong investment crypto firm HashKey Group.
The ChinaAMC and Harvest bitcoin ETFs closed up about 1.5% each, while those of Borsara closed up 1.8%. All three ether ETFs closed less than 1% lower.
Hong Kong cryptocurrency spot ETFs have one big attraction: no taxes
Bitcoin ETFs recorded trading volume of nearly HK$67 million (US$9.2 million) by the end of the day, with the ChinaAMC ETF recording the most trades with around 37 million Hong Kong dollars changed hands.
Hong Kong’s launch of new cryptocurrency ETFs, seen as offering some advantages for investors in Asia Compared to similar products in the US that are much larger in size, it will test the city’s progress in its bid to become a hub for virtual asset businesses.
At the close of trading, the six Hong Kong funds had raised nearly HK$87 million. By comparison, 11 bitcoin ETFs in the United States, which debuted in January, saw more than $4.6 billion traded on their first day.
Hong Kong could expect trading volume of its spot cryptocurrency ETFs to reach 20% of that of the United States within about a year, Livio Weng, chief operating officer of HashKey Group, said in a briefing on Tuesday.
Market makers likely contributed the majority of the first day’s trading, so it remains to be seen how demand for these products will hold up in the coming days and weeks.
Fund managers and intermediaries are offering favorable policies to attract investors, with Harvest waiving management fee for six months and Bosera for four months. Chinese online brokerage Tiger Brokers said in a statement on Monday that it will offer platform fee waivers for the first batch of these ETFs.
Given the small size of Hong Kong’s ETF market compared to the United States, the funds hope to attract investors looking for products offered specifically in Asia.
Non-Hong Kong residents can buy shares of crypto ETFs as long as they meet local know-your-customer (KYC) requirements, HashKey Capital said in a statement on Tuesday.
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Is Cryptocurrency Too Risky for China?
Is Cryptocurrency Too Risky for China?
While this means that ETFs are technically available to mainland Chinese investors who have bank or brokerage accounts in Hong Kong, investing in these products may still be difficult because mainland Chinese ID cards may not be able to pass brokerage platforms’ KYC procedures, said an industry insider who declined to be named due to the sensitivity of the matter.
Beijing has strictly banned commercial trading of cryptocurrencies on the mainland. Other types of ETFs can already be traded through the Stock Connect scheme which connects to the Shanghai and Shenzhen markets.
Hong Kong regulators at Tuesday morning’s launch event, which included a bell-ringing ceremony, warned that there are high risks associated with cryptocurrency-based products, despite successful listings.
“Our approval for virtual asset ETFs does not amount to endorsing relevant virtual assets or encouraging the public to invest in them,” Christina Choi Fung Yee, executive director of investment products at the Securities and Futures Commission, said at the ceremony. . “Virtual assets are extremely speculative with highly volatile prices… I would like to remind everyone that virtual assets are not suitable for all investors.”