Three recently approved exchange-traded funds (ETFs) for Bitcoin (BTC) and Ether (ETH) in Hong Kong may not have the impact that some expect, according to senior Bloomberg ETF analyst Eric Balchunas. The Hong Kong Securities and Futures Commission (SFC) granted conditional approvals to Harvest Fund Management, Bosera Asset Management, and China Asset Management to issue spot Bitcoin and Ether ETFs. However, Balchunas cautioned against high expectations, citing four reasons. Firstly, he noted that the Hong Kong ETF market is small compared to the US. Secondly, these ETFs do not allow Chinese retail investors access. Balchunas also pointed out that the three prospective ETF issuers are much smaller than major asset management firms like BlackRock. Finally, he highlighted that the capital environment for these funds is not as efficient, and fees are likely to be higher. Balchunas concluded that while the addition of Bitcoin ETFs in other countries is positive, it pales in comparison to the US market. On the other hand, Jamie Coutts, chief crypto analyst at Real Vision, believes that despite the size limitations of the Hong Kong ETF market, these products will attract a significant amount of capital from Chinese investors who are already adept at bypassing government-imposed capital controls. The Hong Kong FSC approved the use of an in-kind model for these ETFs, allowing new shares to be issued directly using BTC and ETH. This differs from the cash-create redemption model used by US spot Bitcoin ETFs, as the SEC has concerns about potential money laundering and fraud. The spot ETFs are expected to launch in two weeks.
Hong Kong's Ether and Bitcoin ETFs face challenging odds to secure more than $500m