Hong Kong is gearing up to launch its first spot crypto exchange-traded funds (ETFs) by mid-2024, a move that could redefine the landscape of digital asset investment in the region, according to Jan. 22 news reports.

Multiple firms are looking to launch spot Bitcoin ETFs within the coming months now that Hong Kong has softened its stance toward the industry and begun to establish regulatory frameworks.

ETF trend

The ETF trend is picking up steam after the U.S. SEC approved 11 spot Bitcoin ETFs on Jan. 10 after more than a decade of rejecting such products. This has caused regulators worldwide to adopt a more favorable approach toward such products and crypto.

The impending introduction of spot crypto ETFs in Hong Kong signifies a pivotal moment in integrating cryptocurrency into mainstream finance, and their launch is seen as a strategic move to capitalize on the burgeoning demand in the Asian time zone.

These ETFs are expected to provide a regulated avenue for investing in digital assets, thereby offering significant benefits, including promoting orderly markets for underlying cryptocurrencies, enhancing investor protection, and facilitating the amalgamation of digital asset platforms with traditional financial institutions.

However, challenges remain, particularly regarding fee structures and regulatory compliance. With only two licensed crypto exchanges in Hong Kong, there is pressure to ensure that fees remain reasonable.

The Hong Kong Securities and Futures Commission (SFC) requires virtual asset funds be held on licensed digital asset trading platforms or banks meeting specific custodial standards.

Upcoming ETFs

Gary Tiu, executive director and head of regulatory affairs at OSL, told reporters that the firm is in advanced discussions with a range of fund companies, with about five to ten companies actively exploring the launch of such ETFs.

He noted that among these, approximately five are progressing more swiftly, potentially leading to the debut of Hong Kong’s first spot crypto ETFs within the year.

HashKey, another licensed crypto exchange in Hong Kong, echoed similar sentiments earlier this month. Livio Weng, the COO of HashKey, noted that about ten fund companies are considering the launch of spot crypto ETFs in the region.

Adding to the momentum, Venture Smart Financial Holdings is planning a spot bitcoin ETF launch within the first quarter of 2024 to manage assets worth $500 million by the end of the year.

Meanwhile, according to local media reports, current market players, including Samsung Asset Management and CSOP Asset Management, are closely monitoring these developments to assess market demand and regulatory conditions before venturing into spot crypto ETFs.

Assad Jafri

AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.

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