In a groundbreaking development for the crypto sector in Hong Kong, Harvest Fund Hong Kong, a prominent player among China’s fund companies, has taken a huge step by submitting an application for a Bitcoin spot Exchange Traded Fund (ETF) to the Hong Kong Securities and Futures Commission (SFC). This move, exclusively reported by Chinese media Tencent News, represents the first of its kind in Hong Kong, signaling a significant shift in the region’s approach to digital asset trading and investment.
Chinese Spot Bitcoin ETF By February 10?
The application by Harvest Fund marks a pivotal moment in Hong Kong’s financial landscape, following closely on the heels of the US Securities and Exchange Commission’s (SEC) landmark approval of the first batch of US Bitcoin spot ETFs on January 11, 2024. This US decision included the conversion of the Grayscale Bitcoin Trust’s GBTC from a closed-end fund to a Bitcoin spot ETF, as well as the approval of applications from Western financial behemoths such as BlackRock and Fidelity.
In the wake of these developments, the Hong Kong SFC is reportedly considering expediting the approval process for the first Bitcoin spot ETF in the region, with plans to list it on the Hong Kong Stock Exchange shortly after the Chinese New Year, as early as February 10. The Tencent News report suggests that the SFC may adopt a similar strategy to the US SEC by approving several spot ETF applications simultaneously, although, as of now, Harvest Fund remains the sole applicant.
Industry insiders speculate that even with the approval of multiple spot ETFs, the dominance of large institutions in the US market, such as BlackRock and Fidelity Funds, may be mirrored in Hong Kong. This expectation stems from the significant investor bases and extensive customer acquisition networks these institutions possess. For instance, BlackRock’s IBIT currently ranks third in size among over 600 ETFs issued in the US in the past year, highlighting the growing investor interest in spot ETFs over other ETF types.
There are also rumors of a possible operational divergence between the spot ETFs in the US and Hong Kong. According to Tencent News sources, in addition to cash creation, Hong Kong spot ETFs could also offer the possibility of Bitcoin redemptions “in kind“, a feature not currently available on US spot ETFs. However, the SFC has not officially commented on this aspect.
Further Fund Companies Ready To Launch?
As reported earlier by Bitcoinist, approximately ten Chinese asset management companies are gearing up to launch spot Bitcoin and crypto ETFs in Hong Kong, a move indicative of the region’s growing acceptance and integration of digital assets into its financial ecosystem. Livio Weng, COO of HashKey Group, revealed that seven to eight of these companies are “in advanced stages” of launching these products.
This initiative aligns with the evolving regulatory stance of the SFC and the Hong Kong Monetary Authority (HKMA). In December 2023, they issued a circular expressing their openness to applications for virtual asset spot ETFs, marking a departure from their previous “professional-investors only” policy established in 2018. This shift reflects a broader trend towards embracing and regulating digital assets, positioning Hong Kong as a potential hub for Bitcoin and crypto investment and innovation.
At press time, BTC traded at $42,267.
Featured image created with DALL·E, chart from TradingView.com