Hong Kong’s First Crypto Spot ETFs Coming Mid-2024

• According to Gary Tiu, an OSL exec, Hong Kong’s first crypto spot ETFs are coming by mid-2024.
• Up to ten fund companies are ramping up research in preparation for spot crypto products.

Hong Kong is poised to introduce its first spot crypto exchange-traded funds (ETFs) by mid-2024, according to Gary Tiu, executive director and regulatory affairs director of OSL, a licensed crypto exchange. 

This development was disclosed today in an article in the Hong Kong Economic Journal.

Tiu said that OSL is in close contact with many fund companies. He anticipates the launch of the first ETFs before mid-year, with an estimated 5-10 companies currently conducting research.

Despite the excitement, Tiu cautions that the initial phase may see limited competition and competitive pricing, attributed to the market’s nascent stage with only two licensed platforms. 

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However, he acknowledges the need to maintain reasonable fees, spurred by market transparency and comparisons with the US market.

Sharing Tiu’s optimistic outlook, Livio Weng, COO of HashKey Group, another licensed virtual asset exchange in Hong Kong, revealed to Caixin earlier this month that over ten fund companies are in advanced stages of preparation to launch spot ETFs in the country. 

With 7 out of 8 companies already in the promotional phase, there’s a strong push towards launching Hong Kong spot ETFs in the coming months, Weng expects.

This push is further bolstered by a welcoming regulatory environment. 

The Hong Kong Securities and Futures Commission (SFC) is currently open to applications for authorization of funds that invest in or have exposure to virtual assets. 

Last month, the SFC introduced new regulations specifying the criteria that SFC-authorized funds must meet to directly invest in spot crypto funds.

Last week, Venture Smart Financial Holdings (VSFG), one of Hong Kong’s first SFC-approved virtual asset managers, told Bloomberg that it plans to file for an ETF with the SFC. 

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The company aims to introduce its ETF product in Q1/2024, with ambitions to manage assets worth $500 million by year-end.

The move towards crypto ETFs in Hong Kong follows the successful establishment of spot Bitcoin ETFs in the US, setting the stage for Hong Kong to become a new hub for crypto ETFs.

However, concerns linger regarding market demand, especially given the modest assets under management by existing crypto funds in Hong Kong. 

Yet, Zhu Chengyu, chairman of VSFG, remains optimistic, highlighting the strategic advantage of catering to the Asian time zone and the ongoing negotiations with institutional investors across Asia, including South Korea, Japan, and Taiwan, to bolster demand for these innovative financial products.

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