Hong Kong launches Bitcoin ETFs, Australia follows suit - Will others join?

The global surge in spot crypto ETFs reflects increasing adoption of blockchain in traditional finance. These ETFs offer direct exposure to cryptocurrencies like Bitcoin and Ethereum, operating within regulated frameworks for safer investment compared to unregulated platforms.

The United States recently greenlit its inaugural batch of spot Bitcoin ETFs. In January 2024, the U.S. Securities and Exchange Commission (SEC) sanctioned 11 such ETFs from major issuers such as ARK, Grayscale, Blackrock, and Fidelity.

Prior to U.S. approval, countries like Canada and some in Europe had already introduced similar offerings. Canada, for instance, greenlit several spot Bitcoin ETFs starting in 2021, enabling investors to access Bitcoin directly through regulated investment channels.

Today, Techopedia delves into Hong Kong's Bitcoin ETF launch, with Australia poised to join the trend.

Hong Kong introduces spot crypto ETFs

Six new spot Bitcoin and Ether ETFs were unveiled in Hong Kong on Tuesday, April 30, marking the region's inaugural cryptocurrency ETF launch. Local issuers, including Harvest Fund Management, Bosera Asset Management, and China Asset Management, received approval to introduce these ETFs following Hong Kong's regulatory nod.

Potential demand for Hong Kong's spot crypto ETFs includes wealth from Chinese investors in the city and activity from Asia-Pacific crypto exchanges and market makers. Bloomberg Intelligence's Rebecca Sin predicts that these ETFs could accumulate around $1 billion in assets over the next two years, although Harvest Global CEO Han Tongli considers this estimate conservative.

Tongli highlights that Hong Kong's financial products and services appeal to both Western and Eastern investors, unlike the US market, which primarily targets the former. Notably, Hong Kong distinguishes itself with an in-kind ETF subscription and redemption mechanism, facilitating the exchange of underlying assets for fund units, unlike the cash redemption model utilized by US Bitcoin funds.

Despite the promising outlook, the initial combined trading volume of Hong Kong's six inaugural Bitcoin and Ethereum spot ETFs reached only 87.58 million HKD ($12 million) as of the latest market close. This figure sharply contrasts with the US, where the first Bitcoin ETF garnered a staggering $4.6 billion in trading volume on its debut day. However, Hong Kong's launch was considered a soft introduction compared to the fervent demand seen in the US.

Global momentum builds for crypto ETFs

The recent regulatory greenlights in the United States have sparked a surge in global interest in cryptocurrency ETFs. This momentum is expected to pave the way for similar developments in Asian markets, with several countries poised to introduce their own crypto ETFs in the foreseeable future.

Antoni Trenchev, co-founder of crypto exchange Nexo, shared with CNBC his belief that Japan, Singapore, and South Korea could be the next to approve similar products within the next two years.

Karim Saber, a research associate at crypto ETP issuer 21Shares, highlighted Asia as the primary region where these approvals are likely to occur next.

"We anticipate Singapore and Japan to increasingly pursue regulatory approval following South Korea," he explained to Blockworks. "The approval in Hong Kong could catalyze discussions this year as Asian countries vie for prominence as the next financial center for innovation."

Australia may approve Bitcoin ETFs by end of year

The Australian Securities Exchange (ASX), dominating 90% of the country's equity market, is poised to authorize Australia's inaugural spot Bitcoin ETFs by year-end. Discussions are reportedly underway between ASX and various entities eager to introduce Bitcoin ETFs.

DigitalX Ltd. initiated the process with an application in February, while VanEck reentered the fray with a resubmission during the same period. Sydney-based BetaShares has also signaled its intent to launch a Bitcoin ETF on the ASX.

In parallel, Monochrome Asset Management, hailing from Australia, has sought approval for a spot Bitcoin ETF from Cboe Australia, a global listing exchange and ASX's smaller competitor. Monochrome cited Cboe Australia's regional expertise and wider investor reach as motivations for choosing the exchange.