China is eager to seize the opportunity and not be left behind, as the community responds to the news about a Bitcoin ETF being introduced in Hong Kong.
Despite having clear regulations, Hong Kong has been slow to embrace futures-based cryptocurrency ETFs up to this point.
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The cryptocurrency community is abuzz with anticipation over reports that the Hong Kong government is contemplating the launch of a spot cryptocurrency exchange-traded fund (ETF). This comes in the midst of ongoing regulatory resistance against such products in the United States.
The potential entry of Hong Kong into the world of spot crypto ETFs is seen as a significant development, especially in the context of the economic rivalry between the U.S. and China, as noted by BitMEX co-founder Arthur Hayes. Hayes took to a platform similar to Twitter on November 6 to express his enthusiasm for the competition between the two economic giants, emphasizing that this competition will ultimately benefit Bitcoin, which was trading at $35,103 at the time.
"Competition is incredible. If the U.S. has its proxy asset manager, BlackRock, launching an ETF, China needs its proxy asset manager to launch one, too," he remarked.
Cryptocurrency brand Coin Bureau was quick to react to the potential launch of a spot crypto ETF in Hong Kong. According to Coin Bureau, the U.S. Securities and Exchange Commission (SEC) may face increasing pressure as other jurisdictions, like Hong Kong, embrace the concept of a spot Bitcoin ETF. Coin Bureau suggested that it serves as a warning to the SEC that if they continue to stifle innovation in U.S. capital markets, other countries will step in to fill the void.
Crypto influencer Lark Davis also highlighted that the latest news about a spot crypto ETF in Hong Kong indicates that the Chinese government is eager to seize opportunities in the crypto space, stating, "Hong Kong is going to get spot Bitcoin ETFs now! Chinese money does not want to miss out."
Hong Kong is considering allowing retail investors to access spot ETFs linked to cryptocurrencies like Bitcoin, provided that regulatory concerns are addressed, as per a Bloomberg report from November 5, quoting Securities and Futures Commission CEO Julia Leung. The SFC did not immediately respond to Cointelegraph's request for comment.
This potential move by Hong Kong into the realm of spot Bitcoin ETFs comes as at least a dozen investment firms in the U.S. are actively seeking to launch similar products despite the longstanding resistance from the SEC.
While both Hong Kong and the U.S. have permitted crypto ETFs linked to futures contracts, neither jurisdiction has yet approved a spot crypto ETF. Unlike a futures Bitcoin ETF, which tracks futures contracts to replicate BTC prices, a spot Bitcoin ETF directly holds BTC, allowing investors to gain direct exposure to the asset.
The U.S. was the first to launch futures-linked crypto ETFs in 2021, with Hong Kong following suit in late 2022 with the introduction of CSOP cryptocurrency futures products. Hong Kong currently has around $65 million in crypto ETF assets, which includes the Samsung Bitcoin Futures Active ETF, though their market share remains relatively small compared to other global crypto funds.
Geographical split of assets in publicly listed crypto funds. Source: Bloomberg Intelligence
Notably, the Hong Kong and Shanghai Banking Corporation, the largest bank in Hong Kong, reportedly enabled its customers to buy and sell Bitcoin and Ether-based ETFs in June 2023.
