Tech
Hong Kong’s first spot bitcoin and ether ETFs win conditional approval as city looks to gain market leadership
Hong Kong has approved preparations to launch exchange-traded funds (ETFs) that invest directly in bitcoin and ether, the world’s two largest cryptocurrency tokens, as the city seeks to secure a leadership position in the volatile virtual asset sector.
The overseas arm of Chinese fund firm Bosera Asset Management and Hong Kong virtual assets firm HashKey Capital have received “conditional approval” from the Securities and Futures Commission (SFC) to jointly launch cryptocurrency spot ETFs, the companies said in announcements posted online on Monday.
Chinese fund managers Harvest International and China Asset Management Company (ChinaAMC) are also among those that have received the green light, according to China’s Caixin news agency. ChinaAMC announced it was working on those ETF products after receiving SFC approval for provide virtual asset management services.
The SFC, which first published rules to allow spot cryptocurrency ETFs in Decemberwas widely expected to approve spot bitcoin ETFs this week. The inclusion of spot ether ETFs makes it the first exchange in Asia, and the first global financial hub, to approve such a product. The U.S. Securities and Exchange Commission (SEC) approved spot bitcoin ETFs in January, but delayed a decision on similar ether products.The SFC has not made any announcements about ETFs, as none have been officially approved yet. Conditional approval allows applicants to proceed with preparations to offer the funds, such as applying to Hong Kong Exchanges and Clearing (HKEX) to offer them on the local stock exchange.
“The SFC issues a conditional clearance letter for an ETF application if it generally meets our requirements, subject to various conditions, including payment of fees, submission of documents and approval for listing by HKEX,” the SFC said in a statement to the Post, without clarifying the status of any spot crypto ETF applications.
Spot cryptocurrency ETFs are seen as a boon for investors who want exposure to these assets without having to worry about setting up their own blockchain portfolios or other technical details that can be a hindrance. ETFs can also be included in things like pension funds, making them more attractive to traditional investors.
Since the U.S. began allowing spot bitcoin ETFs this year, trading volume has reached $200 billion, according to cryptocurrency data and news site The Block.
The price of Bitcoin has been rising strongly since the end of last year, especially after the approval of the US ETF in January. However, the price fell by about 8 percent last week, to around $66,700. After approving the spot ETF, SEC Chairman Gary Gensler warned that Bitcoin remains a “speculative and volatile asset.”
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The SEC has repeatedly delayed its decision on ETFs that invest directly in ether, the native token of the Ethereum blockchain. It is expected to conclude its review in late May.
That makes approval in Hong Kong, which typically trails the U.S. in approving such financial instruments, more challenging as the city seeks to transform itself into a virtual asset hub.
Although the Hong Kong market is relatively small, industry insiders say local spot cryptocurrency ETFs could be globally competitive because they allow both cash and in-kind subscriptions, i.e. the conversion of bitcoin or ether into their ETF equivalents. In the United States, the products can only be purchased with dollars.
The in-kind deal offers benefits such as lower transaction costs and greater operational efficiency, said Andrew Fei, a partner at King & Wood Mallesons in Hong Kong.
“The approval of Asia’s first spot bitcoin and spot ether ETFs marks a major milestone in Hong Kong’s quest to become a global digital asset hub,” Fei said. “Asia’s strong crypto investor base, combined with in-kind redemption functionality and support for Hong Kong dollar trading, gives these Hong Kong ETFs a real competitive edge.”
Further information is provided by Matt Haldane.