While Taiwan is still considering whether to open up Bitcoin ETFs for secondary trading, Hong Kong has announced that it may approve the issuance of a Bitcoin spot ETF as early as the second quarter. Furthermore, this ETF will adopt a different physical creation model from that of the United States. This will bring more support to the Bitcoin market.
Last December, the Securities and Futures Commission (SFC) issued a joint circular stating that it is ready to accept virtual asset spot ETFs. Executives of the Hong Kong Stock Exchange also commented on this news, stating that the Hong Kong Stock Exchange is ready to embrace ETF investment opportunities. At that time, Livio Weng, the Chief Executive Officer of the Hong Kong-based cryptocurrency exchange HashKey, revealed that around 10 fund companies in Hong Kong had begun exploring the possibility of launching cryptocurrency spot ETFs. Industry insiders have also continued to urge government agencies to approve virtual asset spot ETFs as soon as possible to avoid the risk of giving advantages to US capital.
Now it seems that not only is a Bitcoin spot ETF likely to be listed in the near future, but it will also adopt a different physical creation model from that of the United States. This means that investors can directly exchange physical Bitcoins with the issuer for related spot ETF shares, which may bring more support to the Bitcoin market.
Eric Balchunas, an ETF analyst at Bloomberg, wrote that it appears that Hong Kong will allow physical creation and redemption of Bitcoin spot ETFs in the second quarter (unlike the United States, which only allows cash creation). This may help quickly stimulate the management scale and trading volume of ETFs.
Since 1999, Hong Kong has been issuing index-tracking funds, including leveraged, inverse, Bitcoin (currently only futures-based), bond-type ETFs, and other diversified products. By 2023, its market trading scale will reach 450 billion US dollars.
(Explanatory chart: SEC’s preferred ETF cash model, and the difference from BlackRock’s physical Bitcoin ETF)
Physical Creation
Bitcoin
Bitcoin Spot ETF
Hong Kong
Further Reading:
Bitcoin ETFs have seen net inflows for two consecutive days, and four Bitcoin ETFs have surged into the top 30 in the world in terms of size.
Have institutional investors entered the Bitcoin spot ETF market? The truth will be revealed in the mid-May 13F reports.