Tech
Hong Kong Bitcoin and Ether ETFs Seen as Attractive to Asian Buyers, but Are a ‘No-brainer’ Compared to the Size of the U.S. Market
“We can expect a healthy level of interest, especially with other Asian jurisdictions staying away from issuing domestic bitcoin spot ETFs for now,” said Angela Ang, senior policy advisor at blockchain analytics firm TRM Labs.
Spot bitcoin ETFs in the U.S., approved in January, are also available globally, but many Asian investors may prefer to avoid the hurdle of opening a U.S. investment account and paying the country’s capital gains tax, said Michael Wong, a partner at Hong Kong law firm Dechert LLP.
“It’s just more convenient for Hong Kong investors or probably Asian investors in general, who don’t want to open a brokerage account in the U.S.,” Wong said.
Wong said the mere fact of having to file U.S. tax forms could be a deterrent for some investors interested in investing in bitcoin, noting that Hong Kong does not tax capital gains.
Hong Kong’s upcoming approval of bitcoin and ether ETFs also represents a “milestone for the digital asset industry overall,” as it “creates an additional regulated avenue for price exposure to the asset class with the ability to trade within the Asian time zone,” said Chengyi Ong, head of APAC policy at blockchain research firm Chainalysis.
Ong noted that demand for virtual asset price exposure is strong in Asia, which accounted for US$791 billion of the US$1.17 trillion worth of bitcoin traded in February this year, according to data from The Block, a cryptocurrency news and data agency. North American investors traded US$113 billion worth of bitcoin that month.
Ultimately, however, demand for Hong Kong products will depend on the size of the local market, tariffs and similar factors, Ong said.
“The expense ratio is definitely going to be something investors are going to look at,” Dechert’s Wong said. “If you have a comparable or competitive expense ratio for [Hong Kong’s spot crypto] ETFs, then I’m sure they will be very interesting for many investors.”
Others were more dismissive of the new products. Eric Balchunas, senior analyst at Bloomberg ETF, said X, formerly Twitterthat the offering is “a no-brainer” compared to similar products in the U.S. because Hong Kong is a relatively “small” market. “Don’t expect a lot of traffic,” he wrote.
Firms planning to launch spot crypto ETFs in Hong Kong would now have to work to meet other requirements before offering them, such as applying for a listing on the local stock exchange, while they await final approval from the SFC, according to the regulator. Wong estimated that the ETFs could launch by June.