Hong Kong Grants Approval to Spot Bitcoin and Ether Exchange-Traded Funds (ETFs)
Hong Kong’s securities regulator allegedly sanctioned the in-kind creation model for Bitcoin and Ether exchange-traded funds rather than the cash-create structure in the US.
Hong Kong is the most recent nation to admit spot exchange-traded funds (ETFs) for Ether and Bitcoin.
Hong Kong Welcomes Spot Bitcoin and Ether ETFs
Local regulators have approved at least three local issuers. On April 15, the initial spot Bitcoin Ether and Bitcoin were approved by the Hong Kong Securities and Futures Commission (SFC).
Further news reveals that at least three offshore Chinese asset managers will soon unveil their spot Bitcoin and Ether exchange-traded funds. They include Bosera Asset Management, Harvest Fund Management, and China Asset Management (ChinaAMC).
Bosera intends to partner with Hong Kong-headquartered HashKey Capital to unveil its spot crypto exchange-traded funds. OSL Digital Securities is an approved digital asset platform in Hong Kong and will serve as Harvest’s and ChinaAMC’s sub-custodian.
SFC Issues Conditional Approval Letter
The Securities and Futures Commission (SFC) provides a conditional approval letter to an exchange-traded fund if it meets the requirements. Further, document filing, fee payments, and listing ratification by the Hong Kong Stock Exchange (HKEX) should be met.
The Securities and Futures Commission allegedly approved the unveiling of spot Ether and Bitcoin exchange-traded funds as in-kind exchange-traded funds. This means that new ETF shares can be issued using Ether and Bitcoin.
The in-kind creation model differs from the cash-create redemption structure that permits issuers to develop new exchange-traded fund shares only with cash.
At present, spot Bitcoin exchange-traded funds utilize the cash-create model in the US because local securities regulators prefer this redemption approach.
OSL board chairman and chief Patrick Pan told a media outlet that the in-kind subscription model for the spot Ether and Bitcoin exchange-traded funds in Hong Kong represents a considerable innovation.
The process improves market liquidity by permitting the direct exchange of the asset for exchange-traded fund shares. As such, it reduces dependence on cash payments and ensures continuous trading flows.
Further, Patrick noted that the principle is critical for promoting market stability and conforms to traditional and digital asset exchange-traded funds practices.
Patrick claimed that acquiring ratification, in principle, indicates that organizations have satisfied most of the critical vetting processes and brings them nearer to the unveiling.
Nevertheless, it is still early to anticipate when precisely the spot Bitcoin exchange-traded fund will begin trading in Hong Kong. He added that despite the uncertain dates, all parties are meticulously working to accelerate the unveiling.
Hong Kong Crypto Market Set to Witness Influx of Capital
The ETFs are anticipated to considerably increase the influx of capital into Hong Kong’s digital asset market. It rivals the US ETFs that have seen record-high transaction volumes despite the endless haemorrhage suffered by Grayscale’s GBTC, eroding its gap from the chasing pack led by BlackRock’s IBIT.
Despite a request for comment concerning the ETF approval, Bosera, Harvest, and the SFC did not respond.
The approval coincides with an era of optimism that the Securities and Futures Commission will approve the initial set of spot Bitcoin exchange-traded funds on April 15.
Reports show that HKEX will require nearly two weeks to conclude listing procedures and other arrangements following the SFC’s consent.
