Crypto ETFs to debut in Hong Kong next week

Hong Kong has authorized six cryptocurrency-based spot ETFs set to launch on April 30, according to Bloomberg.

These ETFs include three for bitcoin and three for ether, enabling investors to bet on these cryptocurrencies without owning them. The approval follows the greenlighting of ETFs managed by China Asset Management, Harvest Global, Bosera, and HashKey earlier this month.

China Asset Management is the largest issuer with over $55 billion in assets under management in mainland China and $3.6 billion in Hong Kong. It manages nearly 100 ETFs across both regions.

Although these ETFs are not expected to draw as much capital as those in the U.S., like those offered by BlackRock and Fidelity, the move is a major step in Hong Kong’s strategy to become a hub for digital assets.

Unlike the U.S., where spot bitcoin ETFs are cash-only, Hong Kong’s new funds will be “in-kind,” which allows for direct contributions of bitcoin and ether. Experts say this method is less complex and less costly for investors.

Bloomberg ETF analyst Rebecca Sin noted during a discussion that Hong Kong’s decision to offer in-kind funds differentiates it from the U.S. market, catering to investors who already hold cryptocurrencies. He estimates that these new ETFs may attract around $1 billion in assets under management in the first couple of years, a revision from an earlier $500 million forecast.

However, mainland Chinese investors are barred from participating in these funds due to government restrictions on crypto-related investments, which could limit capital inflow.

China, which banned the trading and mining of cryptocurrencies in 2021, remains one of the world’s most restrictive countries regarding digital assets. The approval of these ETFs, announced by issuers including ChinaAMC, Harvest Global, and Bosera International rather than the Securities and Futures Commission (SFC) of Hong Kong, has opened possibilities for new investments in bitcoin.

The anticipation surrounding the ETFs was heightened by speculations from industry players like Matrixport, which suggested demand from Chinese investors could reach $25 billion. However, a recent report by Wu Blockchain indicated that “southbound funds”—investments from mainland China—would be restricted from accessing these ETFs.