- Hong Kong approves initial Spot Bitcoin and Ethereum ETFs, aiming to re-establish itself as a major financial hub.
- These ETFs will allow in-kind creation and redemption, enhancing cost-efficiency and liquidity, setting them apart from US counterparts.
- The launch might not be accessible to mainland China but could influence regional crypto policies and interest.
Hong Kong regulators have given initial Spot Bitcoin and Ethereum exchange-traded funds (ETFs) the nod of approval, according to asset managers.
Although Hong Kong’s Securities and Futures Commission (SFC) has yet to officially make comments, three of the applicants for the products – Harvest Global, ChinaAMC and Bosera International – confirmed the green light.
Related: Financial Titans Harvest Fund and Southern Fund Eye Bitcoin ETFs, Seek Approval in Hong Kong
According to CNBC, ChinaAMC said post the approval it is now “actively deploying resources in the development” of both a Spot Bitcoin and Ethereum ETF.
This move comes despite the official ban on crypto on the mainland, with Hong Kong trying to re-establish itself as a financial hub and become a regional crypto centre.
Despite the news, the crypto market continues its downturn, at the time of writing all major assets are down, both Bitcoin (-3.3%) and Ethereum (-1.8%) continue to trend downwards.
Hong Kong Move Will Allow In-Kind Redemption
Unlike their US counterparts, the Hong Kong ETFs will allow in-kind creation and redemption.
In-kind redemptions are favoured by both ETF investors and issuers for their cost-efficiency, favourable tax outcomes, and liquidity benefits, enhancing overall ETF flexibility and performance.
However, in cases like hard-to-transfer assets or impractical markets, cash redemptions are used, which may raise costs and taxes. According to Bloomberg’s Eric Balchunas, this efficiency could greatly accelerate ETF adoption and expand assets under management in Asia’s burgeoning crypto markets.
JAN3 founder and CEO, Samson Mow said allowing in-kind creation and redemption will position Hong Kong and these ETFs competitively against US ETFs.
It is unclear if and how people from mainland China will have access to these ETFs, but the launch could stimulate greater interest and awareness of cryptocurrencies in the region, potentially impacting discussions and policies in Mainland China over the long term.
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