According to a recent report from the Chinese publication Securities Times, many leading funds have filed with the Hong Kong Securities Regulatory Commission for spot Bitcoin ETFs in the country.
Hong Kong’s supportive regulatory environment could make it a global crypto hub.
The Hong Kong subsidiary of Harvest Fund and one of China Southern Fund are among the largest firms seeking approval to launch their fund from the SRC. In addition, China Asset Management’s Hong Kong arm reportedly partnered with a Hong Kong Bitcoin ETF custodian, which analysts believe could soon publicly join the race this quarter.
“We are also arranging the Bitcoin business, and are also launching related products in the Hong Kong market through the platform of the Hong Kong subsidiary, but they are not futures ETFs,” said Harvest Fund’s spokesperson.
HK Grows Crypto Offerings
In December 2022, China Southern Fund’s Hong Kong subsidiary officially launched Asia’s first cryptocurrency ETFs in Hong Kong—CSOP Bitcoin Futures ETF and CSOP Ethereum Futures ETF. This move made the Hong Kong stock market a capital market that can provide investors with future ETFs for Bitcoin and Ethereum.
The growing trend of using Hong Kong units to enter the spot Bitcoin ETF market is likely motivated by the strong performance and trading activity of CSOP Bitcoin futures ETF. In 2023, the net value of this fund increased by 1.34 times. The fund’s return rate has already reached 51.53% just over three months into the year.
Despite legalizing crypto, Hong Kong is still slow in issuing spot Bitcoin ETFs. Experts say the country could approve the spot Bitcoin ETFs as early as the second quarter of 2024. This could be a major market opportunity, considerably increasing asset management scale and trading volume for Bitcoin ETF issuers.
Data shows that at the end of 2023, HashKey oversaw $210 billion in total assets, while Southern Fund had $280 billion worth of assets under management. Their involvement in providing underlying infrastructure support for these ETFs suggests a growing ecosystem for virtual asset investments in Hong Kong.
The Hong Kong subsidiaries of public funds view Bitcoin as a way to differentiate themselves in the saturated Hong Kong stock market. With over 2,000 asset management companies competing for investor attention, Bitcoin offers a novel investment opportunity.
Securities Times noted that the potential approval of spot Bitcoin ETFs in Hong Kong could attract new investors seeking exposure to this asset class. Additionally, the recent surge in Bitcoin’s price above its previous all-time high further strengthens the confidence of fund companies in pursuing Bitcoin spot ETFs.
A Welcoming Regulatory Landscape
Hong Kong regulators are committed to promoting responsible development within the virtual asset market. This includes measures like information transparency and public education. The goal is to make Hong Kong a new hub for virtual asset innovation. Over 220 Web3-related companies have established a presence in the country.
BitMEX founder Arthur Hayes believes that Hong Kong’s participation in the cryptocurrency spot ETF market will be an important development amid the economic confrontation between the US and China.
Lark Davis, founder of Wealth Mastery, said previously that Hong Kong’s consideration of issuing an ETF shows that China does not want to miss out on opportunities in the cryptocurrency market.
The applications from leading public fund subsidiaries for Bitcoin ETFs are seen as a sign of market maturity and development potential. With more public funds potentially following suit and deploying Bitcoin business through their Hong Kong subsidiaries, the Hong Kong market is set to become a major player in the global Bitcoin ETF ecosystem.
However, despite the potential benefits, Bitcoin’s inherent volatility and historical price fluctuations pose a significant risk for investors. The early advantage of institutional investors who bought Bitcoin at lower prices can also create uncertainty in the future price trend.
