Hong Kong spot crypto ETFs debut tomorrow: 6 things to know

As a seasoned crypto investor with a deep understanding of the global market, I’m thrilled about the upcoming launch of spot Bitcoin and Ethereum exchange-traded funds (ETFs) on the Hong Kong Stock Exchange (HKEX). This event represents another significant milestone in developing regulated investment products for digital currencies.

As a crypto investor, I’m excitedly looking forward to an anticipated industry milestone taking place tomorrow in Hong Kong. The city is set to debut trading for spot exchange-traded funds (ETFs) linked to the physical Bitcoin (BTC) and Ether (ETH) cryptocurrencies.

Three Chinese firms, specifically China Asset Management, Bosera Asset Management, and Harvest Global Investments, plan to debut cryptocurrency exchange-traded funds (ETFs) via their Hong Kong branches on the Hong Kong Stock Exchange (HKEX) come April 30.

The occasion signifies yet another significant achievement in the global creation of controlled cryptocurrency investment instruments and Exchange-Traded Funds (ETFs), coming after the groundbreaking debut of U.S. spot Bitcoin ETFs in January 2024.

As the anticipated launch of the ETF draws near in Hong Kong, CryptoMoon gathers essential information to share with its audience regarding this upcoming trading event.

HKEX already trades Bitcoin futures and other crypto contracts

Crypto ETFs backed by spot cryptocurrencies weren’t a novelty when they started trading on the Hong Kong Exchange (HKEX) for the first time.

In late 2022, CSOP Bitcoin Futures ETF and CSOP Ether Futures ETF, managed by CSOP Asset Management, began trading on Hong Kong Exchanges and Clearing (HKEX). These exchange-traded funds (ETFs) follow cash-settled Bitcoin and Ether futures contracts from the Chicago Mercantile Exchange (CME).

In January 2023, Samsung Asset Management Hong Kong introduced a new Bitcoin ETF that is based on futures, named Samsung Bitcoin Futures Active ETF.

As of April 29, 2024, the three cryptocurrency ETFs listed on HKEX collectively manage $170 million or 1.3 billion Hong Kong dollars in assets, based on information provided by HKEX.

All Hong Kong ETFs account for 0.6% of the U.S. ETF market

Based on the given information, it’s clear that the Hong Kong ETF market pales in size when compared to the robust ETF market in the United States. (or) The data makes it apparent that the Hong Kong ETF market is significantly smaller than its counterpart in the US.

As of March 2024, the entire Exchange-Traded Fund (ETF) market in the US consisted of approximately 3,457 distinct ETFs, with a combined asset value of around $8.9 trillion, and were listed on three different exchanges based on data from ETFGI.

Instead of saying “On the other hand,” you could phrase it as: “However, it’s estimated that the ETF market in Hong Kong is worth approximately $50 billion, based on information from Bloomberg data analyst Jack Wang.”

As a researcher studying the growth of exchange-traded funds (ETFs) in Hong Kong, I’ve discovered that Hong Kong Exchanges and Clearing Limited (HKEX) listed the first active ETF on their platform back in June 2019. By the end of 2023, HKEX had amassed a total of 24 actively managed ETFs, collectively worth approximately 8.6 billion Hong Kong Dollars ($1 billion).

As a crypto investor, I’ve noticed that the size of China’s ETF (Exchange-Traded Fund) market was approximately equal to $238 billion in the year 2023, based on data compiled by Bloomberg.

In-kind crypto ETFs in Hong Kong vs. cash-create ETFs in the U.S.

One key distinction between Hong Kong’s crypto ETFs and those in the US lies in the process of ETF redemption. In Hong Kong, this mechanism may differ notably.

As a crypto investor, I’d explain it this way: In contrast to U.S. Bitcoin spot ETFs where new shares are created by providing issuers with cash, Hong Kong’s spot crypto ETFs will have an in-kind creation process. This means that when ETF intermediaries need to produce new ETF shares, they give the issuers actual cryptocurrencies like Bitcoin instead of cash.

Instead of U.S. Bitcoin ETF creators being able to issue only cash-settled spot Bitcoin ETFs where intermediaries can’t handle the actual cryptocurrency, providers in contrast operate under restrictions preventing them from dealing directly with the digital asset.

In a Bloomberg webinar on April 24, Rebecca Sin, Bloomberg’s senior ETF analyst, explained that Hong Kong likely made in-kind contributions for the sake of distinguishing itself from the United States ultimately.

Hong Kong’s spot Ether ETF will not be the first one in the world

As a crypto investor, I’m thrilled about the upcoming launch of Hong Kong’s spot Bitcoin ETF, as it will bring more than just in-kind spot cryptocurrency ETFs to the table. What makes this even more enticing is the anticipated introduction of a spot Ethereum ETF – an innovation that has yet to materialize in the US markets.

U.S. securities regulators are predicted to reject proposed Ether ETFs in May and may postpone their final decision on this issue. In contrast, Hong Kong regulators have already approved such ETFs.

As an analyst, I would rephrase it as follows: I’m here to share some insights. While Hong Kong’s spot Ethereum Exchange-Traded Fund (ETF) is gaining attention, it’s important to note that it’s not the only one of its kind globally. In fact, Canadian regulators greenlit the first Ethereum futures ETFs in their territory back in April 2021. This puts Canada among the pioneering nations introducing such innovative investment products.

As a researcher studying exchange-traded funds (ETFs) related to Ether in Canada, I have identified five different options: Purpose Ether ETF, Evolve Ether ETF, CI Galaxy Ethereum ETF, 3iQ CoinShares Ether ETF, and Fidelity Advantage Ether ETF. These funds offer investors a potential way to gain exposure to Ether through the regulated investment vehicle of an ETF.

Mainland China investors won’t be able to buy Hong Kong Bitcoin ETFs

The introduction of spot crypto ETFs could have fueled hopes that China’s stance on cryptocurrencies might soften, but this assumption may be misplaced.

As a crypto investor, I understand that mainland Chinese citizens may face restrictions when it comes to purchasing Hong Kong’s spot crypto Exchange-Traded Funds (ETFs), despite the close connections between these ETF issuers and mainland China. This limitation is likely due to regulatory differences between the two regions.

Based on the analysis of Bloomberg’s Wang, Chinese citizens are forbidden from participating in any cryptocurrency-related activities. Consequently, investing in crypto ETFs is not an option for them.

Wang stated that he attempted to place a trade for a future-based crypto ETF listed in Hong Kong, but the brokers flat-out refused the transaction. He is convinced that Chinese investors are unlikely to invest in such products in the near future.

China AMC is the biggest issuer in terms of AUM

As a financial analyst, I would put forth that among the three crypto Exchange-Traded Fund (ETF) providers based in Hong Kong, China Asset Management (Hong Kong), which is the local arm of China Asset Management, holds the largest asset management portfolio.

Based on Bloomberg’s report, China Asset Management Company (China AMC) oversees $3.6 billion in assets through 15 ETFs based in Hong Kong. However, the figure representing the total assets managed by China AMC’s parent company in mainland China amounts to a staggering $55.7 billion – a 1,400% larger sum.

The other two issuers, Bosera and Harvest, handle $40 million and $16 million in AUM in Hong Kong.

In a bullish market condition, Hong Kong’s exchange-traded funds (ETFs) focused on cryptocurrency spots, as suggested by Wang, have the potential to amass between $500 million and $1 billion in assets under management within one to two years.

2024-04-29 15:11