Hong Kong has become the first region in Asia to provide access to crypto exchange-traded funds (ETFs) after its regulatory bodies granted clarity on virtual asset development. However, despite the regulatory green light, two Bitcoin ETFs and an Ether ETF listed on the Hong Kong Stock Exchange (HKSE) are seeing lukewarm demand.
HKSE recently reported that the average daily trading volume of these crypto ETFs between December 16, 2022, and February 7, 2023, was HKD 9.30 million ($1.19 million). While this is a positive step towards legitimizing cryptocurrencies, these numbers are considerably lower than global counterparts, particularly the United States.
On April 17, 2023, Cointelegraph reported that Bitcoin and Ether futures and options listed on the United States-based CME Group had an average daily notional value of over $3 billion. Additionally, the ProShares Bitcoin Strategy ETF listed on NYSE Arca had an average daily volume of around $196 million.
U.S. Regulatory Climate vs. Hong Kong Regulatory Climate
The U.S. regulatory bodies have approved futures-based Bitcoin ETFs, such as the ProShares Bitcoin ETF. But they have denied the conversion of Grayscale Bitcoin Investment Trust (GBTC), the largest over-the-counter Bitcoin fund in the country, to a listed spot ETF. Similarly, the SEC has also denied the listing application of Ark Investment Management’s ARK21 Shares Bitcoin ETF.
Interestingly, despite the lack of regulatory clarity in the United States, the demand for Bitcoin and Ether ETFs is still considerably higher than in Hong Kong, where regulatory clarity is much higher. While the regulatory body in Hong Kong has undoubtedly helped to provide a framework for crypto ETF development, more needs to be done to boost demand and make these products more attractive to investors.
Samsung Bitcoin Futures Active ETF
One of the Bitcoin ETFs listed on the HKSE is the Samsung Bitcoin Futures Active ETF. This ETF was created by the investment management arm of the South Korean conglomerate, and it has been designed to cater to the needs of institutional investors who want to trade Bitcoin futures in the Asia-Pacific time zone.
Conclusion
Hong Kong’s regulatory clarity has provided a positive framework for the development of crypto ETFs. However, the demand for such products remains modest compared to global counterparts, particularly in the United States. While more needs to be done to make these products more attractive to investors, the Samsung Bitcoin Futures Active ETF is a positive step towards greater institutional adoption of cryptocurrencies.
