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Potential ETFs on Bitcoin and Ether in Hong Kong

Carolane de Palmas | Tuesday 16 April 2024

Yesterday, on Monday, April 15th, several investment product issuers in Hong Kong declared that the local financial market regulator, the Securities and Futures Commission (SFC), approved spot Bitcoin (BTCUSD) and Ethereum (ETHUSD) Exchange-Traded Funds (ETFs) in Hong Kong. Let’s take a closer look at what this could mean for local traders and the overall crypto market:

An image of Bitcoin ETFs

A New Chapter in Bitcoin and Ether Investments in Hong Kong

On April 15th, 2024, three ETF providers in Hong Kong—Harvest Global, Bosera International, and ChinaAMC—announced that they had received initial regulatory approval from the Securities and Futures Commission for the potential launch of an ETF product on spot Bitcoin and Ether. 

However, the Securities and Futures Commission has not issued any official news release on its website to confirm these announcements. This lack of official confirmation implies that these ETFs may not have received full authorization yet, and consequently, the launch date is unknown.

While this approval could stand in stark contrast to mainland China's 2021 ban on crypto-trading, Hong Kong could become the first major financial centre in Asia to embrace Bitcoin and Ether as mainstream investment options (and the first to approve ETFs on Ether). 

Moreover, by approving Bitcoin and Ether ETFs, Hong Kong could be strategically positioning itself as a regulated hub in the region for crypto-trading, which could enhance the city's attractiveness as a financial centre.

What Could ETFs on BTC and ETH Potentially Mean for Investors in Asia?

ETFs on Bitcoin and Ether could offer a regulated way to invest in cryptocurrencies, potentially attracting new investors who might be reluctant to get into the complex process of buying tokens on crypto exchanges and storing them themselves. 

Additionally, these financial products could support institutional demand that is currently finding it challenging to get exposure to Bitcoin and Ether during Asia trading hours as they mostly rely on the US trading session.

Bitcoin and Ether ETFs could also boost the overall liquidity of both cryptocurrencies in the region. By presumably increasing the investor pool and institutional participation, ETFs can improve market efficiency, which in turn can influence market liquidity.

All of these factors could make it easier (and potentially cheaper) for traders to buy and sell these assets in Hong Kong, which could lead to wider adoption of cryptocurrencies as an investment vehicle in Asia—similar to what happened when the SEC approved Bitcoin and Ether ETFs in January 2024 (past performance does not guarantee future results). 

Of course, ETFs won’t eliminate the inherent risk of crypto-trading and traders will have to take into consideration their own profile and risk tolerance, as well as the ETFs’ replication structure (mostly physical ETFs vs synthetic ETFs), the regulatory framework and fees before getting started with spot Bitcoin and Ether ETFs trading. (Source: CNBC)

Conclusion

Bitcoin's rise to a new record high on March 13th, 2024, was partly fueled by potential Bitcoin and Ether Spot ETFs in the United Kingdom, as crypto-related ETFs can potentially attract new crypto-traders. The strong bullish price movement was also observed in Ether’s price, which reached its highest level since December 2021 on March 12th, 2024.

The news of a potential spot Bitcoin and Ether ETFs doesn’t seem to have had a strong positive impact on the price of both cryptocurrencies this time, as both tokens ended yesterday’s trading session in the red (April 15th, 2024).

With the upcoming halving event on the Bitcoin network, short-term volatility is likely to increase in the crypto market.


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