March 27, 2024
Hong Kong's Potential Spot Crypto ETF
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Hong Kong’s Potential Spot Crypto ETF Launch Spurs Competition Amid U.S.-China Economic Rivalry

The Hong Kong government is reportedly considering the launch of a spot cryptocurrency exchange-traded fund (ETF), sparking enthusiasm in the cryptocurrency community amidst the ongoing regulatory resistance against such products in the United States.

BitMEX co-founder Arthur Hayes believes that Hong Kong’s potential foray into spot crypto ETFs could be a significant development, particularly in the backdrop of the economic rivalry between the U.S. and China.

Expressing his excitement via X on Nov. 6, Hayes highlighted the positive impact of competition between the two economies and its potential benefits for Bitcoin. He believes that the competition is amazing, and if the U.S. has its proxy asset manager, BlackRock, launching an ETF, China needs its proxy asset manager to launch one, too.

Coin Bureau, a cryptocurrency brand, swiftly reacted to the potential launch of a spot crypto ETF in Hong Kong, suggesting that the U.S. Securities and Exchange Commission (SEC) might face pressure as other jurisdictions like Hong Kong move toward introducing a spot Bitcoin ETF.

The Coin Bureau emphasized on X that if the SEC continues to impede capital market innovation in the U.S., other countries will seize the opportunity. Crypto influencer Lark Davis highlighted that the Hong Kong news about the spot crypto ETF indicates the Chinese government’s interest in not missing out on crypto opportunities.

According to a Bloomberg report on Nov. 5, Securities and Futures Commission CEO Julia Leung stated that Hong Kong is contemplating allowing retail investors to access spot ETFs linked to cryptocurrencies like Bitcoin, provided regulatory concerns are addressed.

In the U.S., around a dozen investment firms are seeking to launch similar products, despite the SEC’s prolonged resistance. While both Hong Kong and the U.S. have permitted crypto ETFs linked to futures contracts, approval for a spot crypto ETF is pending in both jurisdictions. A spot Bitcoin ETF directly holds BTC, different from a futures Bitcoin ETF that tracks futures contracts to mirror BTC prices, enabling investors to gain direct exposure to the asset.

The U.S. pioneered futures-linked crypto ETFs in 2021, with Hong Kong following suit in late 2022 with the introduction of CSOP cryptocurrency futures products. Presently, Hong Kong hosts approximately $65 million in crypto ETF assets, including the Samsung Bitcoin Futures Active ETF, as per Bloomberg data. Nonetheless, futures crypto ETFs in Hong Kong have observed relatively low demand, with their share remaining relatively small compared to other global crypto funds.

Reportedly, the Hong Kong and Shanghai Banking Corporation, the largest bank in Hong Kong, enabled its customers to trade Bitcoin and Ethereum-based ETFs in June 2023.

Image by freepik

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