Hong Kong-based subsidiaries are set to launch Bitcoin Exchange-Traded Funds (ETFs), signaling a potential shift in the approach to cryptocurrency investment. Harvest Fund’s and CSF’s Hong Kong branches have applied for Bitcoin ETFs, with Harvest Fund planning to launch a Bitcoin spot ETF. This move aims to diversify investment options in the Hong Kong market and pave the way for new cryptocurrency investment strategies.
Crypto ETFs are gaining traction in Hong Kong, with Agro-Insurance International, China Southern Fund, and others participating in the regulatory environment and setting high standards. Harvest International’s application for a physical ETF product is currently awaiting approval from the Securities and Futures Commission (SFC), a regulator known for its competence and commitment to investor protection.
China Southern Fund’s Hong Kong operation has taken a significant step in cryptocurrency ETFs by launching two futures ETFs for Bitcoin and Ethereum in December 2022, making it the first in the Asian region. This range of offerings is expected to further attract major investors and enhance the competitive dynamics, favoring the first Bitcoin spot ETF in the market.
The emergence of these ETFs reflects a broader industry shift towards bitcoin, driven by the success of cryptocurrency funds and their performance. China Southern Fund’s subsidiary’s futures ETF, SBF, has seen a profitable increase of 1.34 times in net value in 2023, achieving a return rate of 51.53% in the first few months of 2024. This indicates the robustness of cryptocurrency ETFs in Hong Kong and the strong interest and validity of such instruments in the local financial market.
The regulatory environment in Hong Kong is actively fostering a climate that allows the virtual market to thrive while ensuring necessary safeguards for development. The city has attracted over 220 Web3-related units from around the world, highlighting its appeal as a hub for blockchain innovation and virtual assets.
This regulatory environment is crucial in providing a transparent legal framework to maximize investment and innovation in virtual assets. It is expected that spot applications for Bitcoin ETFs will emerge in the second quarter of this year, creating more opportunities for the market and showcasing the efforts of the crypto sector to tap into Hong Kong’s financial market and products for crypto/blockchain companies.
The focus on Bitcoin spot ETFs by leading public fund subsidiaries in Hong Kong could be a game-changer in the long run. It has the potential to elevate alternative investment strategies in Hong Kong and enable public fund subsidiaries to compete with foreign-funded institutions, should the investment domain catch up.
While the outlook for Bitcoin is positive, with a market value of over US$1.3 trillion, the crypto-investment space is known for its high risk and volatility. Historic Bitcoin price peaks instill confidence in investors but also highlight the inherent risks in cryptocurrency markets.
The introduction of Bitcoin ETFs in Hong Kong’s finance industry marks a transformative era and demonstrates a broader acceptance and integration of cryptocurrency into general investment portfolios. This development also boosts confidence for others to adopt digital currencies as payment tools in primary market transactions.
