Hong Kong Set to Launch Spot Bitcoin ETFs with Potential for High Demand

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Hong Kong asset managers, including ChinaAMC and Harvest Global, are poised to introduce spot bitcoin ETFs as early as this month, following regulatory approval. This move could significantly widen cryptocurrency investment opportunities for both professional and retail investors in the region.

Asset managers in Hong Kong, including divisions of China Asset Management (ChinaAMC) and Harvest Global, are preparing to launch their spot bitcoin exchange-traded funds (ETFs) potentially by the end of this month.

“Reports suggest a spot BTC ETF may start in late April, with a spot ETH ETF following shortly after,” said Patrick Pan, chairman of the board and CEO of OSL. “All parties are working expeditiously to complete the process. However, exact dates remain unconfirmed at this time.”

“We view the recent approval in principle positively as it moves the industry closer to launching spot crypto ETFs,” Pan further commented.

Additionally, Pan conveyed to Foresight News, a Chinese-language crypto news platform, that these spot bitcoin ETFs could be available to investors as early as late April.

This follows the Hong Kong Securities and Futures Commission’s recent preliminary approval for several asset managers, including those managed by ChinaAMC, Harvest, Bosera, and HashKey, to offer both spot bitcoin ETFs and spot ether ETFs. OSL is set to provide sub-custodial and infrastructure services for the ETFs issued by ChinaAMC and Harvest.

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Katie He, head of product and strategy at ChinaAMC (HK), expects significant demand for the upcoming spot crypto ETFs, noting that “substantial” interest is anticipated as previously only professional investors in Hong Kong had access to U.S.-listed spot ETFs.

He outlined three methods for Hong Kong-based investors to gain cryptocurrency exposure when the spot crypto ETFs are launched. “They can access spot bitcoin on the SFC-licensed VATPs, or they can get access through futures-based bitcoin or ether ETFs which may raise efficiency concerns due to high rolling costs associated with futures contracts,” He said. “Meanwhile, only professional investors in Hong Kong could have access to US-listed spot ETFs, so the introduction of spot products in Hong Kong really provides the investment opportunity to a wider audience.”

Despite the optimism, Bloomberg Senior ETF Analyst Eric Balchunas tempered expectations. “Don’t expect a lot of flows… we think they’ll be lucky to get $500 million,” he posted on X on Monday, pointing out that the Hong Kong ETF market is relatively small and inaccessible to Chinese locals officially.

Some industry voices speculate that the new Hong Kong spot crypto ETFs could draw considerable interest from investors on the Chinese mainland through the Southbound Stock Connect program, although this remains speculative as the program does not currently include crypto futures ETFs, let alone spot versions.

Gary Tiu, executive director and head of regulatory affairs at OSL, noted that crypto ETFs are not yet part of the Stock Connect program’s eligible securities, but he believes “the possibility or at least the potential for such inclusion is something that the market certainly likes.”

A distinctive feature of the upcoming Hong Kong spot crypto products is their in-kind attribute, as explained by He. “The in-kind dealing provides convenience to switch spot Bitcoin to a fully regulated spot Bitcoin ETF managed by a professional fund manager and regulated custodians, providing ease of trading as well as reducing the various risks such as hacking and fraud encountered by investors when investing directly in Bitcoin.”

Tiu emphasized the importance of this feature, which is unique in the market: “What it means is if you have an investor who has long BTC. But they don’t want to exit the BTC position. But they want to swap it for another type of instrument — for example, for an ETF instrument or for an interest in the fund that tracks the performance of BTC — this now gives them the channel to do so,” Tiu explained.

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