In a recent social media post, Eric Balchunas, an ETF expert at Bloomberg, recently highlighted Hong Kong's move toward allowing in-kind creations and redemptions for spot Bitcoin ETFs in the second quarter of 2024. This decision may set Hong Kong apart from the United States, where such transactions are strictly cash-based.
Balchunas predicts that this shift could ignite a surge in assets under management (AUM) and trading volumes in the rapidly expanding Asian region.
Backing Balchunas' assertion is the research conducted by another leading ETF expert, Rebecca Sin. Sin's analysis underscores Hong Kong's ETF landscape, which has evolved significantly since the inception of its flagship Tracker Fund in 1999. Over the years, the market has introduced innovative products, including covered-call, leveraged, inverse and fixed-income ETFs.
The introduction of a spot Bitcoin ETF in Hong Kong holds immense potential, given the exponential growth witnessed on the U.S. market, which now boasts $62 billion in Bitcoin ETFs. Unlike the U.S., where only cash creations are permitted, Hong Kong aims to facilitate in-kind creations, allowing investors to exchange Bitcoin for ETF shares. This departure from the U.S. model presents a unique opportunity to market participants.
The initiatives follow Hong Kong's announcement in 2023 that it was open to receiving applications for spot ETFs for cryptocurrencies.
Moreover, earlier, news spread that approximately 10 financial institutions are gearing up to apply for the launch of spot Bitcoin ETFs in Hong Kong, with discussions underway regarding the possibility of spot Ethereum ETFs. Venture Smart Financial Holdings and Harvest Hong Kong, for example, have already submitted an application.
Arman Shirinyan
Mushumir Butt
Godfrey Benjamin
