Digital Assets

Hong Kong Accelerates Crypto Market Growth with New Bitcoin ETFs

Hong Kong is currently positioning itself for a significant surge in the cryptocurrency market through the introduction of spot Bitcoin exchange-traded funds (ETFs).

Regulators in the city are expediting approvals, with announcements expected as soon as next week, according to a Reuters report. This development could enhance Hong Kong's status as a financial hub by attracting traditional financial institutions and investors to the burgeoning crypto sector, which has seen Bitcoin's value increase by approximately 60% this year, reaching over $70,000.

Several Chinese asset management firms are leading the race to launch these ETFs. Hong Kong's Value Partners revealed in January their intent to collaborate with Venture Smart Financial Holdings for a Bitcoin ETF. Similarly, Shenzhen’s Bosera Asset Management and HashKey Capital have initiated a partnership focused on virtual asset spot ETFs. Additionally, China Asset Management and Harvest Fund Management have recently received regulatory approval to manage portfolios with significant investments in virtual assets.

Major banks are also supporting the distribution of crypto ETFs in Hong Kong. HSBC was the first to include crypto ETFs in its offerings in June 2023, followed by UBS in November, allowing clients to invest in Bitcoin and Ether-related ETFs. Existing crypto-related products on the Hong Kong stock exchange include the CSOP Bitcoin Futures ETF and the Samsung Bitcoin Futures Active ETF.

The launch of spot ETFs is a part of Hong Kong’s broader strategy to establish itself as a center for digital assets. This effort was bolstered by the implementation of a virtual asset licensing regime in June 2023. The city is aiming to compete with the United States, which approved its first 11 spot Bitcoin ETFs in January. According to Gerald Goh, co-founder of Sygnum, adopting traditional financial structures to facilitate crypto investments is crucial for bringing this asset class into the mainstream, as it allows for broader investment through funds rather than direct purchases by individuals.