Hong Kong is set to approve its first spot Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) as early as Monday, according to Bloomberg.
Approval Process
The Securities and Futures Commission (SFC) is finalizing the approval process, with Harvest Global Investments and a partnership between Bosera Asset Management and HashKey Capital likely to receive the first approvals.
These approvals are subject to completing listing arrangements with Hong Kong Exchanges & Clearing Ltd. (HKEX), with a target launch date by the end of April.
Spot vs. Futures ETFs
Unlike futures-based crypto ETFs currently available in Hong Kong, these spot-crypto ETFs will allow direct investment in actual cryptocurrencies. This provides a more tangible asset base for investors.
In-Kind Creation Model
The upcoming ETFs will use an “in-kind creation model,” facilitating the exchange of cryptocurrencies in the creation and redemption processes. This reduces costs and improves liquidity.
Strategic Timing
The rollout of these ETFs coincides with the upcoming Bitcoin Halving event, which historically influences market dynamics. This could attract significant investments from Hong Kong and the wider Chinese and Asian market.
Regulatory Advancements
The approval of these spot ETFs is part of Hong Kong’s efforts to foster a regulated and stable environment for digital assets. This includes implementing a regulatory regime for virtual asset service providers and approving virtual asset management funds.
Potential Impact
Matrixport estimates that the ETFs could unlock up to $25 billion in demand from Chinese investors through the Southbound Stock Connect program.
Market Reaction
As of writing, the BTC price has not shown any significant reaction to the news.
