Hong Kong Boards the ETF Express

Hong Kong regulators on Monday approved the launch of spot bitcoin and ether exchange-traded funds (ETFs), according to local reports. It’s the latest signal of the increasing institutionalization of the world’s leading crypto assets, and perhaps a harbinger of things to come in mainland China, which banned virtually all crypto activity in 2021.

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ChinaAMC, Harvest Global and Bosera International are among the asset managers granted licenses to launch these spot market products by the Hong Kong’s Securities and Futures Commission (SFC), though more may follow. In recent months, Hong Kong regulators have signaled their intent to open the former citystate into a crypto hub.

Notably, Hong Kong is positioning itself as one of the first regions to approve spot ether ETFs. Canada, the first country to allow the launch of bitcoin ETFs, approved ETH ETFs a few months later. In the U.S., where the Securities and Exchange Commission’s hand was essentially forced to approve spot bitcoin ETFs is currently dragging its feet on ether-based products.

Europe, Singapore, Australia and Dubai also have approved bitcoin ETFs available in their respective regions. The U.K. will soon allow crypto-traded notes to be traded on the London Stock Exchange starting in May, while Australia is expected to approve them in June this year.

The Hong Kong news is positive especially considering the city’s role as a regional financial hub, perhaps opening the door for nearby neighbors like Japan and Singapore to also open the floodgates to spot bitcoin investing.

However, unlike the unlock that happened in the U.S., which is one of the main drivers of the recent bitcoin rally that has pushed the asset to ever newer all-time highs, there are reasons to doubt billions in new capital will flood into the market. Bitcoin ETFs in the U.S. this year have been some of the fastest growing financial products ever — already accounting for billions in assets under management.

But as financial markets guru Noelle Acheson has pointed out, there is a gulf between the relative market size of the U.S. and Hong Kong.

“A handful of $BTC and $ETH futures ETFs listed in Hong Kong in December 2022, and today, more than a year later, have a combined AUM of just under $170 million,” Acheson tweeted. “For contrast, $BITO – the largest U.S.-listed BTC futures ETF – has an AUM of over $2.8 billion.”