May 1, 2024 - Economy

Hong Kong crypto ETFs come loaded with features

Illustration of a pixelated coin behind Hong Kong's skyline.

Illustration: Shoshana Gordon/Axios

Hong Kong's first spot bitcoin and ether ETFs started trading late Tuesday morning (Monday evening in the U.S.), with the strike of a gong.

Why it matters: The listings follow the January launch of the U.S.'s spot bitcoin funds, yet the new products overseas show a deeper embrace of the digital assets industry and ETF innovation.

Catch up quick: Hong Kong's securities and futures regulator approved a bevy of such exchange-traded funds weeks ago, and now six ETFs — half of them bitcoin, half ether — are vying for fresh dollars.

  • First-day flows and a reported $12 million in trading volume were strong, though just a fraction of the U.S. ETFs' debut, which was measured in billions. (Some people were disappointed, saying the debut was "lackluster.")

The big picture: "I certainly do not think we just followed the U.S.," Vivien Wong, a partner at HashKey Capital — a co-issuer of two of the funds — tells Axios, saying their push into bitcoin and ether ETFs is "pioneering."

  • U.S. investors wait with bated breath for a regulatory decision on ether ETFs expected in late May.

The Hong Kong ETFs also allow for in-kind redemption, rather than the cash redemption structure solely approved for U.S. versions.

  • "The subscription/redemption process opens up a lot of opportunities for crypto native people to enter the market," Wong added.

HashKey partnered with one of Hong Kong's biggest investment firms, Bosera Asset Management, to launch the Bosera HashKey Bitcoin ETF (3008.HK) and Ether ETF (3009.HK).

Zoom in: Bosera Asset Management's Derek Wang said initial interest in the funds started with different types of institutions such as brokerages, family offices and others, but expects retail investors to drive demand.

  • "If you look at the overall Hong Kong ETF markets, retail investors actually play a very important role," he says. "Once liquidity reaches a certain level, we can see large institutional investors start coming into the fund."

What's next: Wang said that he also expects options to launch on their ETFs once they reach a certain size.

The bottom line: Hong Kong's crypto ETF market might still be smaller than the U.S.'s even if that happens, but that trading ecosystem will be richer in products.

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