Amid Bitcoin ETF delays Hong Kong embraces Ethereum ETFs

Hong Kong is preparing to introduce Ethereum ETFs in a bid to outpace the U.S. in the worldwide crypto race, as the launch of Bitcoin ETFs faces delays.
Financial institutions in Hong Kong are racing to unveil Ethereum (ETH) exchange-traded funds (ETFs) ahead of the U.S., with the goal of establishing dominance in the crypto market.
Following the successful launch of Bitcoin (BTC) spot ETFs in the U.S. in January 2024, Hong Kong is eager to capitalize on the increasing demand for crypto investment products.
Despite accepting applications for Bitcoin spot ETFs in December 2023, Hong Kong has yet to see the launch of such products, potentially putting Asian investors at a disadvantage compared to their American counterparts.
To bridge this gap, institutions in Hong Kong are actively preparing for the launch of Ethereum spot ETFs, aiming to gain a competitive edge and bolster the region’s position in the global cryptocurrency market.
This decision comes as Bitcoin spot ETFs in the U.S. witness significant inflows, with the market cap of Bitcoin ETFs reaching nearly $72 billion as of Mar. 18.
Competition and fee dynamics
In Hong Kong, there is a noticeable enthusiasm for crypto investments, particularly evident in the strong growth of Bitcoin futures ETFs.
The Southern Bitcoin ETF (3066) and the Samsung Bitcoin ETF (3135) have seen a doubling in value since their inception, showcasing investor interest in crypto-related financial products.
One of the key players in the ETF race is Venture Smart Financial Holdings Ltd. (VSFG), a major player in Hong Kong’s financial sector. VSFG is preparing to introduce a spot Ethereum exchange-traded fund (ETF) in Q2 if it successfully launches Bitcoin ETFs in Q1.
Lawrence Chu, Chairman of VSFG, mentioned in an interview with the Block that obtaining approval for ETFs involves detailed discussions with regulators.
Chu also indicated the possibility of a fee competition among asset managers in Hong Kong as several firms gear up to launch spot Bitcoin ETFs. This could lead to a race to offer lower fees, similar to the U.S. market.
Spot ETFs delay in Hong Kong
The delay in launching spot BTC ETFs in Hong Kong has raised concerns among industry players, who fear that Asian investors may face disadvantages as a result.
Despite accepting applications for spot Bitcoin ETFs since Dec. 2023, no products have been launched in Hong Kong thus far.
Weng Xiaoqi, CEO of Hashkey Exchange, highlighted the implications of the U.S. SEC approval of spot Bitcoin ETFs. He emphasized that the delay in approving these ETFs could expose Asian investors to higher fees and risks associated with delayed entry of U.S. capital into the market.
To address these concerns, Xiaoqi revealed that several industry stakeholders are actively advocating for the accelerated launch of crypto ETFs in Hong Kong.
Many anticipate that introducing these ETFs will attract significant capital to the region, further solidifying its position in the global financial landscape.
Regulations in Hong Kong
In 2023, Hong Kong made significant strides in crypto regulations, aiming to position itself as a central hub for web3 and digital asset innovation.
This progress is part of a broader trend in Asia towards embracing the digital economy, with regions like Singapore, Dubai, and others leading the way through substantial regulatory advancements.
In Jun. 2023, Hong Kong initiated a crypto licensing regime tailored to virtual asset trading platforms, granting licenses to exchanges like HashKey and OSL to expand their services to retail investors.
Moreover, the Securities and Futures Commission (SFC) of Hong Kong updated its guidelines to broaden the scope of investors eligible for crypto ETF engagements, signaling its commitment to diversifying investment opportunities and making the crypto market more accessible to a wider audience.
The guidelines issued by the SFC in 2023 stress the importance of transparency, due diligence, and understanding of virtual assets to safeguard investors from risks associated with the volatile nature of crypto assets.
Overall, Hong Kong’s regulatory approach aims to protect investors from market manipulation and fraud, positioning the region as a secure marketplace for global investors interested in virtual assets.
The road ahead
As financial institutions gear up to launch spot ETFs, Hong Kong could pose strong competition to its global counterparts in offering a diverse range of crypto investment products.
However, securing regulatory approval and managing competitive dynamics, especially regarding fee structures, will be crucial for these institutions. The upcoming period is pivotal, with the potential to set new standards in the crypto ETF landscape.