Hong Kong is one step closer to having its first spot Bitcoin exchange-traded fund (ETF) as the Securities and Futures Commission (SFC) received its first application for such a product. The spot Bitcoin ETF would allow investors to gain exposure to the price movements of the leading cryptocurrency without having to buy or store it directly.
The first spot Bitcoin ETF application in Hong Kong was filed by Harvest Hong Kong, one of China’s largest fund managers, on Jan. 26, according to Tencent News. Harvest Hong Kong is a subsidiary of Harvest Fund Management, which has over $200 billion in assets under management and is partly owned by Deutsche Bank.
The application comes just weeks after the United States Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETF in the U.S., which was launched by ProShares on Jan. 18 and attracted over $1 billion in assets on its first day of trading.
How will the SFC process the application?
The SFC is reportedly working to expedite the approval process for ETFs in the country and aims to launch the first Hong Kong spot Bitcoin ETF after the Spring Festival, which falls on Feb. 1 this year. The regulator may follow a similar approach to the U.S. SEC and approve multiple spot Bitcoin ETFs to ensure a level playing field and foster competition among the issuers.
The SFC has already established a regulatory framework for crypto-related funds, including virtual asset spot ETFs (VA Spot ETFs) and virtual asset futures ETFs (VA Futures ETFs), which it announced in November 2023. The SFC stated that it is ready to receive applications for the authorization of various funds, including VA Spot ETFs, which would track the performance of one or more virtual assets, such as Bitcoin, that are traded on eligible virtual asset exchanges.
What are the benefits and risks of spot Bitcoin ETFs?
Spot Bitcoin ETFs are designed to provide investors with a convenient and cost-effective way to access the cryptocurrency market without having to deal with the technical and security challenges of buying and storing Bitcoin directly. Spot Bitcoin ETFs would also offer more transparency and liquidity than other investment vehicles, such as trusts or funds, that hold Bitcoin indirectly.
However, spot Bitcoin ETFs also come with certain risks and challenges, such as the volatility and unpredictability of the cryptocurrency market, the regulatory uncertainty and scrutiny of the crypto industry, the operational and cyber risks of the underlying virtual asset exchanges, and the potential for market manipulation and fraud.
Who else is interested in launching spot Bitcoin ETFs in Hong Kong?
Harvest Hong Kong is not the only company that is interested in launching a spot Bitcoin ETF in Hong Kong. According to Cointelegraph, at least 10 financial institutions in the country are actively working to launch a spot Bitcoin ETF in 2024. Some of them are:
- Venture Smart Financial Holdings (VSFG), a financial services firm that has set the first quarter as its target to launch a spot Bitcoin ETF.
- Samsung Asset Management, a fund manager that launched Samsung Bitcoin Futures ETF in 2023 and said it would not “eliminate the possibility of exploring to launch a spot ETF.”
- Huobi Asset Management, a crypto-focused fund manager that launched Huobi Bitcoin Futures ETF and Huobi Ether Futures ETF in 2023 and is reportedly planning to launch more crypto-related products, including spot ETFs.
Hong Kong is emerging as one of the leading crypto destinations in Asia, thanks to its pro-crypto regulatory stance and its vibrant financial market. The launch of the first spot Bitcoin ETF in Hong Kong would be a significant milestone for the crypto industry and a boon for the investors who want to participate in the crypto revolution.