Asia’s first crypto ETFs debut in Hong Kong, demand remains uncertain

Hong Kong has made history as it launched Asia’s first spot Bitcoin and Ethereum exchange-traded funds (ETFs) in an event attended by major financial market players in the country.

The ETFs, issued by prominent Chinese firms like China Asset Management, Bosera Asset Management, and Harvest Global Investments, mark a significant milestone in the region’s financial landscape.

The debut of the six spot crypto ETFs garnered attention from investors, with the spot Bitcoin ETFs by China AMC, Bosera HashKey, and Harvest all experiencing gains of over 3% in early trading though they later weakened to around 1.5%.

On the other hand, the three ether ETFs initially traded above 1% before turning negative.

Hong Kong spearheads crypto ETFs in Asia

Hong Kong’s approval of spot Bitcoin and Ethereum ETFs showcases its commitment to establishing itself as a global digital asset hub. The move comes amid efforts to maintain its allure as a financial centre, despite regulatory challenges and competition from other emerging hubs like Singapore and Dubai.

With China Asset Management, Bosera Asset Management, and Harvest Global Investments leading the charge, Hong Kong aims to position itself as a pioneer in the crypto ETF market.

Executives of China Asset Management hailed the launch as a significant step, emphasizing that it provides institutional and retail investors access to a regulated market for trading crypto assets.

The launch of spot ether ETFs in Hong Kong sets it apart from the United States, where regulatory approval for such products is still pending. While the U.S. Securities and Exchange Commission approved changes to allow Bitcoin ETFs, it is yet to greenlight an ether ETF, giving Hong Kong an edge in the global cryptocurrency market.

Future outlook and investor sentiment

Despite the initial positive reception, questions remain about the pace of demand growth for crypto ETFs in the region.

Although regulatory approval for virtual asset management services has been obtained, it remains uncertain how quickly investors will adopt these products.

While some anticipate slow growth initially, others, like Tongli Han, the CEO of Harvest Global Investments, are optimistic about the long-term potential.

Han believes that Hong Kong’s market potential surpasses that of its U.S. counterparts, citing the city’s ability to attract investors from both the East and the West.

HKEX also anticipates significant growth for the spot crypto ETFs, going by the reception and growth of the crypto futures ETFs that have been trading on the exchange since late 2022.

According to a statement released by the exchange on Tuesday, the combined average daily turnover for the crypto Futures ETFs listed on the exchange reached 51.3 million Hong Kong dollars (equivalent to $6.6 million) in the first quarter of 2024, up from 8.9 million Hong Kong dollars a year earlier.

In addition, Nexo’s co-founder, Antoni Trenchev, in an interview on CNBC on Tuesday highlighted the importance of being a first mover in the region’s crypto ETF market.

He suggested that other countries in the region, including Japan, Singapore, and South Korea, could follow suit in the coming years, further fueling the growth of digital asset investment.

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