Hong Kong launches first crypto ETFs

Hong Kong launched its first two exchange traded funds for cryptocurrency futures on Friday, following through on a commitment made in October to turn the city into a regional digital asset hub rivalling Singapore.

The ETFs made slight gains on their debut, after raising almost $79mn in initial investment. CSOP Asset Management’s bitcoin futures and ether futures ETFs raised $58.9mn and $19.7mn, respectively, ahead of their listings, the Hong Kong-based group said in a statement. The ETFs allow investors in the city access to cryptocurrency futures traded on the Chicago Mercantile Exchange.

The rollout is a crucial component of Hong Kong’s plan to become a crypto hub and comes despite the collapse of Sam Bankman-Fried’s FTX exchange, plunging digital asset prices and signs of distress across the industry.

Several notable Asian crypto groups have already run into trouble following the FTX implosion, with Hong Kong exchange AAX halting withdrawals and Singaporean lender Amber pausing expansion plans.

Hong Kong-based cash-for-crypto shop Genesis Block, which was part-owned by FTX offshoot Alameda Ventures, last month shut down its trading portal and stopped accepting deposits.

Both ETFs opened at HK$7.77 ($1) per unit on Friday and closed 0.5 per cent higher.

Carlton Lai, head of blockchain and cryptocurrency research at Daiwa Capital Markets in Hong Kong, said the initial $79mn raised was lower than expected. “It really shows the bear market and current lack of confidence in the asset class,” he added.

Hong Kong’s push to launch crypto ETFs and make it easier for retail investors to trade digital assets comes after years of stricter regulations than in the rival financial centre of Singapore, although the latter has recently said it intends to get tougher on bad behaviour in the industry.

Julia Leung, who was appointed on Thursday to lead Hong Kong’s Securities and Futures Commission, has highlighted the Chinese territory’s “pioneering” regulatory approach towards crypto trading. A former journalist and currently the market watchdog’s deputy chief executive, she will take over in January as the regulator’s first female head.

“When other main regions are now singing the same tune and establishing a more holistic regulatory regime, we see conditions for more relaxation since we already have [regulations] in place,” Leung told a conference last month.

An update to the city’s anti-money laundering law, passed last week and scheduled to come into effect next year, will require virtual-asset service providers to comply with guidelines before receiving a licence to operate.

The Hong Kong stock exchange’s co-chief operating officer Wilfred Yiu said the ETF rollout would strengthen the city’s role as an international financial centre and support “the continued growth of Hong Kong as Asia’s preferred ETF marketplace”.

“We are excited about the opportunities in the virtual assets space,” he added.

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