The cryptocurrency community is on the edge of its seat as Hong Kong is set to debut spot exchange-traded funds (ETFs) linked to actual Bitcoin (BTCUSD) and Ether (ETHUSD) cryptocurrencies tomorrow. Three major Chinese firms—China Asset Management, Bosera Asset Management, and Harvest Global Investments—will be introducing these crypto ETFs through their subsidiaries on the Hong Kong Stock Exchange (HKEX) on April 30, marking another significant moment in the evolution of regulated crypto investment products and ETFs worldwide. This follows the pioneering launch of spot Bitcoin ETFs in the United States earlier in January 2024.
Background and Current ETF Landscape in Hong Kong Hong Kong’s ETF market already features Bitcoin futures and other crypto contracts. The introduction of spot crypto ETFs isn’t the first instance of such products in Hong Kong. Previously, in late 2022, the CSOP Bitcoin Futures ETF and the CSOP Ether Futures ETF were launched, tracking cash-settled Bitcoin and Ether futures contracts traded on the Chicago Mercantile Exchange (CME). Subsequently, Samsung Asset Management Hong Kong launched the Samsung Bitcoin Futures Active ETF in January 2023. These three futures-based crypto ETFs on HKEX manage assets totaling HK$1.3 billion ($170 million) as of April 29, 2024. Despite the robust growth, the Hong Kong ETF market remains small compared to the U.S., holding just 0.6% of the U.S. ETF market.
Unique Features of Hong Kong’s Spot Crypto ETFs One distinct feature of Hong Kong’s spot crypto ETFs is their in-kind creation process. Unlike the U.S. spot Bitcoin ETFs, which are cash-created, Hong Kong’s spot crypto ETFs allow ETF intermediaries to use actual cryptocurrencies like Bitcoin for creating new ETF shares. This method is expected to differentiate Hong Kong’s ETF offerings from those in the United States.
Global Perspective and Mainland China’s Stance The launch of Hong Kong’s spot crypto ETFs not only introduces in-kind spot cryptocurrency ETFs but also brings a spot Ether ETF to the market—a first for Hong Kong. However, it’s important to note that while this might spur some optimism about mainland China’s stance on crypto, mainland Chinese citizens will still be unable to purchase these ETFs due to strict regulations prohibiting crypto-related activities.
