As Hong Kong accelerates its drive to list the first batch of spot Bitcoin and Ethereum ETF, China’s top asset managers are currently in the final preparations to kickstart trading by April 30. The launch certainly brings excitement for Asian crypto investors after seeing the success of US spot Bitcoin ETFs that accumulated more than $56 billion in assets within just three months of launch.
Competing With US Bitcoin ETFs
HashKey Capital and Bosera have announced that Hong Kong spot-ETFs will adopt an in-kind subscription and redemption mechanism. This allows the exchange of underlying assets for ETF units and vice versa, contrasting with the cash redemption model used by US funds.
According to Evgeny Gaevoy, co-founder of crypto liquidity provider Wintermute Trading Ltd, the in-kind approach is particularly attractive to crypto natives, market makers, and digital asset exchanges. It offers greater efficiency and arbitrage opportunities.
A spokesperson for HashKey mentioned that the Bosera-HashKey Capital spot products will commence trading on April 30. In Hong Kong, crypto-futures-based ETFs are already permitted, with three listed so far: CSOP Bitcoin Futures, CSOP Ether Futures, and Samsung Bitcoin Futures. However, their total assets amount to approximately $175 million, significantly less than US offerings such as the $2.5 billion derivatives-based ProShares Bitcoin Strategy ETF.
Gaevoy added: “Setting realistic expectations for the Hong Kong ETF market is crucial, especially when considering the relatively modest size of the region’s existing futures ETFs”.
Does Hong Kong Have Its Own BlackRock
For over a year, Hong Kong has been in competition with Singapore and Dubai to establish a tightly regulated hub for the virtual asset industry. The demand for the upcoming ETFs will serve as an indicator of Hong Kong’s progress in this endeavor.
Potential sources of demand include Chinese wealth held in the city and crypto exchanges and market makers operating in the Asia-Pacific region. Bloomberg Intelligence ETF Analyst Rebecca Sin estimated that the Hong Kong Bitcoin ETFs could accumulate only $1 billion in assets under management over two years.
US-based Bitcoin funds from industry giants like BlackRock Inc. and Fidelity Investments have already attracted global interest. On the other hand, Hong Kong’s prospective issuers – Harvest Global and Bosera Asset Management – have been lacking similar recognition. Roger Li, co-founder of One Satoshi said: “Hong Kong doesn’t have the ‘BlackRock’ effect to call on”.
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