A bitcoin logo on a window in Hong Kong
Hong Kong’s first spot cryptocurrency exchange traded funds started trading on Tuesday © Paul Yeung/Bloomberg

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Hong Kong’s first spot cryptocurrency exchange traded funds started trading on Tuesday, as the Asian financial hub takes on the US in the race to dominate the growing market.

The rollout follows the launch of similar products in the US by groups including BlackRock and Fidelity Investments in January, which have drawn billions of dollars of investment and helped push the price of bitcoin to a record high of more than $73,000 in March.

The Hong Kong units of three mainland Chinese asset managers — Bosera Asset Management, Harvest Global Investments and China Asset Management — each launched two ETFs tracking bitcoin and ether prices. The Bosera funds were launched in partnership with HashKey Capital.

The three bitcoin ETFs each closed between 1.5 per cent and 1.8 per cent higher on their debut, while the ether ETFs lost between 0.5 per cent and 0.8 per cent. Total trading turnover across the six ETFs — including trading in US dollars, Hong Kong dollars and renminbi — came in at about HK$99.5mn (US$12.7mn). Turnover on the first day of trading for the US funds exceeded $4bn.

Hong Kong announced its push to become a cryptocurrency hub in 2022 after years of pandemic restrictions and Beijing’s tightening grip on the city tarnished its image as a global financial centre.

“This is the first time that virtual asset spot products have been launched in the Asian market . . . verifying Hong Kong’s leading position in Asia in the development of crypto assets,” said Joseph Chan, Hong Kong’s under-secretary for financial services and the treasury, at a listing ceremony for the six funds on Tuesday morning.

CSOP Asset Management launched Hong Kong’s first bitcoin and ether futures ETFs in late 2022, while the Securities and Futures Commission published rules for spot ETFs in December.

In January, the US Securities and Exchange Commission approved the country’s first spot bitcoin ETFs. BlackRock’s iShares Bitcoin Trust has more than $17bn in assets under management, according to Bloomberg data, buoyed by billions of dollars in net inflows and sharp gains in digital asset prices this year.

The 11 US-based spot bitcoin ETFs have drawn about $12bn in total net inflows since their launch, according to London-based Farside Investors.

Robert Zhan, director of risk consulting at KPMG China, said the most optimistic forecasts expected the Hong Kong funds to attract more than $3bn in net inflows.

But Zhan added that the relatively flat prices of ether and bitcoin in the lead-up to the ETF launch suggested the targets may be unrealistic given current market sentiments. The price of bitcoin and ether each fell about 1 per cent in the hour following the funds’ listings on Tuesday morning.

Still, the launch of crypto-linked funds by three of China’s largest mainstream asset managers has generated excitement within the industry, despite Beijing’s strict cryptocurrency rules and warnings from mainland authorities and state media against trading digital assets.

China banned all cryptocurrency trading in 2021, but a substantial number of investors still trade the coins using workarounds such as virtual private networks.

Donald Day, chief operating officer at Hong Kong-based digital asset exchange VDX and a former regulator with the city’s SFC, said the funds could cater to active investors unable or unwilling to trade during US hours.

Copyright The Financial Times Limited 2024. All rights reserved.
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