Hong Kong Competes with US in Bitcoin ETF Market as Cryptocurrency Makes a Comeback

A new era of crypto investment has dawned in Hong Kong as exchange-traded funds (ETFs) directly investing in digital assets made their debut on Tuesday. This development signals potential competition for US Bitcoin products, which have seen a surge in popularity leading to a record rally in the digital asset.

Harvest Global Investments Ltd., the local unit of China Asset Management, along with a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co., listed Bitcoin and Ether ETFs in the city. The level of demand for these funds will provide insights into whether Hong Kong’s efforts to become a regulated digital asset hub are gaining momentum.

US spot-Bitcoin ETFs from major issuers like BlackRock Inc. and Fidelity Investments have already amassed $53 billion in assets since their launch in January. Bloomberg Intelligence’s Rebecca Sin estimates that Hong Kong’s Bitcoin and Ether funds could attract $1 billion over the next two years.

The unique in-kind ETF subscription and redemption mechanism adopted by Hong Kong sets it apart from the US Bitcoin funds, which use a cash redemption model. This approach, according to Harvest Global’s CEO Han Tongli, enhances the appeal of Hong Kong’s products and could lead to a threefold increase in uptake compared to US funds.

While Hong Kong may lag behind the US in launching spot-crypto ETFs, the local products are expected to be attractive for their accessibility, especially during Asian trading hours. Bosera Asset Management (International)’s Head of Products Ethan Li highlighted the appeal of Hong Kong’s offerings for Asian investors.

As digital assets continue to gain traction, with Bitcoin up 287% since last year and Ether up 169%, the launch of these ETFs in Hong Kong marks a significant milestone in the city’s journey to establish itself as a global player in the virtual asset sphere. Investors will closely monitor the performance of these new ETFs to gauge the potential impact on crypto prices and market dynamics.