After US, Hong Kong Debuts Bitcoin ETFs, Competition rages

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Key Takeaways

  • Hong Kong’s crypto ETFs which mark the first of its kind in Asia include six funds issued by Bosera Funds, China Asset Management (Hong Kong) Limited and Harvest Global Investments.
  • Hong Kong has opted for an in-kind ETF subscription and redemption mechanism,

Hong Kong Bitcoin ETFs have made their debut, three months after the United States launched its first ETFs. Hong Kong’s crypto ETFs which mark the first of its kind in Asia include six funds issued by Bosera Funds, China Asset Management (Hong Kong) Limited and Harvest Global Investments.

Speaking to the media, China Asset Management’s CEO, Yimei Li, said that the launch of the spot Bitcoin and Ethereum ETFs on Tuesday “opens the door for a lot of RMB holders” seeking alternative investments.

Bosera Asset Management and Harvest Global Investments launched Bitcoin ETFs through their Hong Kong subsidiaries on the Hong Kong Stock Exchange on April 30 under the tickers CAM, BOS and HGI. Each of the three companies issued a spot bitcoin and a spot ether ETF, which can be traded in both Hong Kong and US dollars, while ChinaAMC also allows trading in Chinese yuan.

Even though China Asset Management is one of the issuers, crypto trading remains banned in mainland China and the new ETFs are only available to Hong Kong residents 

China Asset Management’s Zhu Haokang also confirmed that mainland Chinese investors will not be allowed to invest in Hong Kong’s new ETFs.

“Hong Kong’s qualified investors, institutional investors, retail investors, and international investors who meet the regulations can all invest in cryptocurrency spot ETFs,” he added.

The ETF launch also put Hong Kong in direct competition with the United States for crypto investors. Issuers such as BlackRock Inc. and Fidelity Investments debuted US spot-Bitcoin ETFs in January, marking a historic rollout that has accumulated $52 billion in assets to date. The ETFs offered by both countries are also strikingly different in various aspects

Hong Kong has opted for an in-kind ETF subscription and redemption mechanism, enabling the exchange of underlying assets for fund units and vice versa while the US bitcoin ETF uses a cash redemption model.

The management fees of the Hong Kong ETFs, ranging between 0.3% to 0.99%, are also higher than U.S. spot ETFs owing to the limited number of regulated service providers. While both countries are trying to be more accommodative towards crypto ETFs, it has also sparked a competitive war between both countries.

U.S. spot bitcoin ETFs have drawn roughly $12 billion in net inflows, contributing to a surge in bitcoin’s price earlier this year.  In response to a question on the world’s first spot Ether ETF and whether the United States declaring it security will have any impact in Hong Kong, Huang stated

“Probably not, because whether the United States defines Ethereum as a security does not affect the independent decision-making of the Hong Kong Securities Regulatory Commission.” 

Yimen Lei also stressed that Hong Kong will be the first in the world to launch a spot Ethereum ETF, instead of the United States.

“Hong Kong has already had a clear definition of Ethereum,” he said before stating, “Ethereum is not a security.” He said it is one of the two assets, including Bitcoin, that can be provided to retail investors.

Commenting on Hong Kong ETF debut, Han Tongli, CEO of Harvest Global Investments, “The inflow on the first day is far better than expected,” said adding that Hong Kong should have greater potential than the U.S. in developing the crypto assets as it can attract investors from both west and east.

As per the Bloomberg Intelligence report, Bitcoin and Ether funds in Hong Kong could accumulate $1 billion over the span of two years. While the figures trigger enthusiasm among investors, outflows from US spot Bitcoin ETFs have also surged. As per Farside Investors, on April 29, the total outflows stood at $51 million

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Saniya Raahath
Saniya Raahath

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