By Sharan Kaur Phillora
Hong Kong is on the cusp of a historic moment in the cryptocurrency sector as it gears up to debut its first cryptocurrency exchange-traded funds (ETFs) tomorrow. These ETFs are projected to attract an initial capital influx of $200 to $300 million, potentially setting new records by surpassing the United States’ first-day trading volumes.
Here’s what we know:
Beijing’s Foresight News recently published an interview with China AMC executive Zhu Haokang and Wayne Huang, the Head of ETF and custody business at OSL. Zhu Haokang, the head of digital asset management at China Asset Management, anticipates that the trading volume of Hong Kong’s virtual asset spot ETF will eclipse those of the U.S.
For context, the total inflow for the 10 U.S. Bitcoin spot ETF issuers on their first day was $125 million. Hong Kong’s initial estimates suggest figures ranging from $200 million to $300 million, with a possible eventual market size of $2 to $3 billion.
These ETFs, offered by China Asset Management, Bosera Asset Management, and Harvest Global Investments through their Hong Kong subsidiaries, will be listed on the Hong Kong Stock Exchange (HKEX) at UTC+8. This move is expected to significantly expand Hong Kong’s presence in the global ETF market, which remains considerably smaller than that of the U.S.
One of the key features that set Hong Kong’s ETFs apart from their U.S. counterparts is their redemption method. Unlike the U.S. spot Bitcoin ETFs, which are cash-created, Hong Kong’s ETFs will operate on an in-kind basis, allowing intermediaries to use actual cryptocurrencies like Bitcoin to obtain new ETF shares.
Despite the optimistic projections, challenges remain. Mainland China’s stringent regulations on digital assets mean that a significant portion of potential Chinese investors will be unable to participate. This regulatory barrier limits the broader market potential of these ETFs within the region.
However, global Bitcoin expert Willy Woo highlights the strategic importance of the Asian market, which boasts more users than the U.S. and Europe combined. While initial estimates by Bloomberg analyst Eric Balchunas suggested that Hong Kong’s spot Bitcoin ETFs could attract up to $25 billion, he has since adjusted this projection to $1 billion, citing overly bullish initial expectations.
As the ETFs prepare for launch, the global investment community watches closely, eager to see if Hong Kong can indeed set a new standard for cryptocurrency investments on its first day.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
