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Hong Kong is preparing to introduce ethereum ETFs, racing to beat the US in the global crypto game, while bitcoin ETFs face delays in their launch.
Hong Kong financial institutions are rushing to launch ethereum (eth) exchange-traded funds (ETFs) ahead of the United States, aiming to establish dominance in the cryptocurrency market.
Following the successful introduction of bitcoin (btc) spot ETFs in the US in January 2024, Hong Kong is keen to take advantage of the growing demand for crypto investment products.
Although Hong Kong began accepting applications for bitcoin spot ETFs in December 2023, it has yet to see the launch of such products, leaving Asian investors potentially lagging behind their American counterparts.
To avoid this disparity, Hong Kong institutions are actively preparing for the launch of ethereum spot ETFs, aiming to leverage a competitive advantage and strengthen the region's role in the global cryptocurrency market.
The decision comes amid notable bitcoin spot ETF inflows into the US, where the market capitalization of bitcoin ETFs reached nearly $72 billion as of March 18.
Competition dynamics and rates
In Hong Kong, there is clear enthusiasm for cryptocurrency investments, especially notable in the strong growth of bitcoin futures ETFs.
He Southern bitcoin ETF (3066) and the Samsung bitcoin ETF (3135) have doubled in value since their inception, reflecting investor appetite for cryptocurrency-related financial products.
A key player in the ETF race is Venture Smart Financial Holdings Ltd. (VSFG), a Hong Kong financial sector giant. VSFG is ethereum-etf-in-q2″ target=”_blank” rel=”noopener”>gear to introduce a spot ethereum exchange-traded fund (ETF) in Q2 if it successfully launches bitcoin ETFs in Q1.
Lawrence Chu, president of VSFG, revealed in an interview with The Block that obtaining approval for ETFs requires in-depth discussions with regulators.
Chu also mentions the possibility of a fee war between asset managers in Hong Kong as several companies prepare to launch spot bitcoin ETFs. This means there could be competition to offer lower rates, similar to what we've seen in the US.
Spot ETFs delay in Hong Kong
The delay in the launch of btc spot ETFs in Hong Kong has raised concerns among industry players, who fear that Asian investors could face disadvantages as a result.
Although Hong Kong authorities have been accepting spot bitcoin ETF applications since December 2023, no product has been launched so far.
Weng Xiaoqi, CEO of Hashkey Exchange, bitcoin.com/crypto-industry-players-in-hong-kong-call-for-swift-approval-of-bitcoin-etfs/” target=”_blank” rel=”noopener”>emphasized the consequences of the approval of bitcoin spot ETFs by the US SEC. He highlighted that the delay in the approval of these ETFs could expose Asian investors to higher fees and risks associated with the delay in the entry of American capital into the market.
“The delay in the launch of spot ETFs by half a year also means that it will be half a year later for US capital to enter the market. At that time, it will face higher purchasing costs and entry points and will have to risk being trapped by American capital,” Xiaoqi reportedly explained.
To address these concerns, Xiaoqi revealed that several industry stakeholders are actively advocating for the accelerated launch of crypto ETFs in Hong Kong.
Many anticipate that the introduction of these ETFs will attract large capital to the region, further strengthening its position in the global financial landscape.
Regulations in Hong Kong
Throughout 2023, Hong Kong made notable progress in crypto regulations, aiming to position itself as a central hub for web3 and digital asset innovation.
This development is part of a broader Asian push toward digital economy adoption, with Singapore, Dubai and other regions leading efforts through substantial regulatory advances.
In June 2023, Hong Kong initiated a cryptocurrency licensing regime tailored to virtual asset trading platforms. this regime granted licenses exchanges, such as HashKey and OSL, to expand their trading services to retail investors.
To further strengthen this initiative, the Hong Kong Securities and Futures Commission (SFC) updated its guidelines to broaden the spectrum of investors eligible to participate in crypto ETFs, signaling its intention to diversify investment opportunities and make the crypto market accessible to a broader audience.
Guidance and circulars issued by the SFC in 2023 emphasized the need for transparency, due diligence and understanding of virtual assets.
For example, recognizing the risks associated with the volatile nature of cryptoassets, the guidelines emphasize the importance of offering complex crypto products, such as ETFs, primarily to professional investors along with the requirement for a virtual asset knowledge test to protect investors from the inherent risks. .
Furthermore, the issuance of circular Focusing on the oversight of digital asset tokenization activities highlights a forward-thinking approach to managing and fostering the growth of virtual assets in a regulated manner.
Taken together, Hong Kong's regulatory approach aims to protect investors from potential market manipulations and fraud and establish Hong Kong as a reliable and secure market for global investors interested in virtual assets.
The road ahead
As financial institutions prepare to launch spot ETFs, Hong Kong could offer tough competition to its global counterparts by offering diversified crypto investment products.
However, regulatory approval and managing competitive dynamics, particularly around fee structures, will be crucial for these institutions. As such, the next period is critical, with the potential to set new precedents in the crypto ETF landscape.
