In a recent social media update, Eric Balchunas, an esteemed expert on Exchange-Traded Funds (ETFs) at Bloomberg, shed light on Hong Kong’s imminent move toward permitting in-kind creations and redemptions for spot Bitcoin ETFs by the second quarter of 2024. This forthcoming decision stands to distinguish Hong Kong from the United States, where such transactions are exclusively cash-based.
Balchunas foresees that this strategic adjustment could catalyze a significant uptick in assets under management (AUM) and trading volumes across the swiftly expanding Asian market.
A New Dawn for Bitcoin ETFs Emerges Balchunas’ assessment finds reinforcement in the meticulous research conducted by another prominent ETF authority, Rebecca Sin. Sin’s analysis underscores the substantial evolution of Hong Kong’s ETF landscape since the introduction of its flagship Tracker Fund in 1999. Over the years, the market has witnessed the introduction of innovative products such as covered-call, leveraged, inverse, and fixed-income ETFs.
The prospective introduction of a spot Bitcoin ETF in Hong Kong holds immense promise, particularly in light of the exponential growth witnessed in the U.S. market, which presently boasts $62 billion in Bitcoin ETFs. Unlike the U.S., where only cash creations are permitted, Hong Kong aims to enable in-kind creations, allowing investors to exchange Bitcoin for ETF shares. This departure from the U.S. norm presents a distinct opportunity for market participants.
Giant Leap: China’s Financial Powerhouse Initiates First-Ever Bitcoin Spot ETF Application in Hong Kong These developments follow Hong Kong’s 2023 announcement signaling its openness to receiving applications for spot ETFs catering to cryptocurrencies.
Furthermore, earlier reports have circulated indicating that approximately 10 financial institutions are preparing to apply for the launch of spot Bitcoin ETFs in Hong Kong, with discussions underway regarding the feasibility of spot Ethereum ETFs. Notably, Venture Smart Financial Holdings and Harvest Hong Kong have already submitted their applications, signaling a burgeoning interest in this space.
