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First Asian Bitcoin and Ether ETFs Gain in Debut in Hong Kong | WKZO | All of Kalamazoo
By Summer Zhen
HONG KONG (Reuters) -Six spot bitcoin and ether exchange traded funds (ETFs) gained on their Hong Kong debut on Tuesday, with the three bitcoin ETFs rising more than 3% in early trade, reflecting the Asian investors’ enthusiasm for cryptocurrencies.
The debuts mark the first launch of spot cryptocurrency ETFs in Asia and come just three months after the United States launched its first ETFs to track spot bitcoin.
Spot bitcoin ETFs launched by China AMC, Harvest and Bosera had gained about 2.5% as of 221 GMT. The three ether ETFs managed by asset managers also rose.
Bitcoin rose about 1%.
Cryptocurrency is banned in mainland China, but Hong Kong has promoted itself as a global digital asset hub in a bid to maintain its appeal as a financial centre.
Christina Choi, executive director of the Securities and Futures Commission (SFC), hailed the product’s debut as a milestone in Hong Kong’s ETF market, but also flagged risks.
“Virtual assets are quite speculative and very volatile… so I remind you that such assets are not suitable for all investors,” Choi said at the launch event on Tuesday.
The ETF’s launch also put Hong Kong in direct competition with the United States for cryptocurrency investors.
U.S. spot bitcoin ETFs have garnered about $12 billion in net inflows, contributing to a surge in bitcoin’s price earlier this year. But US regulators have not yet approved ETFs that track ether spot prices.
COMPETITION
Another difference is that Hong Kong crypto ETFs adopt the so-called “in-kind” transaction mechanism that allows investors to buy and sell ETF shares using their crypto tokens instead of cash.
That option should be attractive to investors as token owners “may consider the benefit of holding ETFs without the cost of first converting to fiat (currency),” said Robert Zhan, director of risk consulting at KPMG China.
Trading in Hong Kong crypto ETFs will be closely monitored for signs that cryptocurrency flows may be attracted to Asia from the US
Some analysts expect most of the initial inflow will come from local retail investors, given cost concerns.
The management fee for Hong Kong cryptocurrency spot ETFs, which range from 0.3% to 0.99%, is much higher than that of current US-listed ETFs, due to the limited number of regulated service providers from the city’s rigid legal framework.
Currently Hashkey and OSL are the only two trading platforms approved in Hong Kong.
“If Hong Kong’s SFC approved more participants or trading platforms in the long run, costs would be lower and more competitive,” said Alex Chiu, senior ETF Business strategist at Value Partners.
Bitcoin has gained about 50% this year and reached an all-time high of $73,803 in March. It traded at around $62,944 on Tuesday. Year to date, Ether is up nearly 40%.
(Reporting by Summer Zhen and Sam Shen; Editing by Edwina Gibbs and Lincoln Feast.)