Hong Kong launches Asia's 1st Bitcoin, Ether ETFs, pioneering virtual asset investment

Hong Kong marked a milestone in its ambition to become a regional hub for virtual asset investment as it commenced trading Asia's inaugural spot bitcoin and ether exchange-traded funds (ETFs) on Tuesday.

This move follows the US, which paved the way for mainstream investors to incorporate Bitcoin into their portfolios through ETFs pegged to the cryptocurrency's spot price.

Hong Kong's bourse saw the introduction of six funds by three managers—Bosera Funds, China Asset Management (Hong Kong) Limited, and Harvest Global Investments—each issuing spot bitcoin and ether ETFs tradable in both Hong Kong and US dollars.

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ChinaAMC (HK) additionally enabled trading in Chinese yuan, expanding the accessibility of digital assets to investors.

In the early hours of trading, the new ETFs showed promising performance, with price increases ranging from 0.62 per cent to 3.81 per cent, highlighting investor interest and confidence in the emerging asset class.

Despite predictions that these funds may not attract inflows comparable to their US counterparts, industry experts remain optimistic about their potential to catalyse broader adoption of digital assets globally.

The inclusion of bitcoin and ether ETFs in Hong Kong's financial ecosystem comes with the city's efforts to position itself competitively against established financial centres like the US, leveraging its unique advantages such as in-kind trading.

Unlike traditional ETFs, which primarily transact in fiat currencies like the US dollar, Hong Kong's approach allows investors to conduct in-kind creation and redemption through eligible dealers, facilitating direct investment using bitcoin and ether.

Han Tongli, CEO of Harvest Global, highlighted this distinct advantage over the US market, positioning Hong Kong as a major contender in the international financial arena.

Tongli acknowledged the city's role in fostering innovation and development, defending its status as a premier global financial hub.

Moreover, Hong Kong's regulatory flexibility presents an opportunity for China to explore virtual asset trading, a sector currently prohibited on the mainland.

While demand for bitcoin ETFs in the US has moderated following an initial surge in February, Hong Kong's foray into digital asset investment signifies a wider trend towards embracing cryptocurrencies and blockchain technology.

With regulatory bodies like the Securities and Futures Commission showing their readiness to facilitate retail investment in digital asset funds, Hong Kong is set to attract further interest from fund managers seeking to capitalise on the developingmarket.

(With inputs from AFP)