Hong Kong launches first cryptocurrency ETFs

Hong Kong launched its first two Exchange Traded Funds for cryptocurrency futures on Friday, following a pledge it made in October to transform the city into a regional digital asset hub that rivals Singapore.

The ETFs traded essentially flat in their debut, having raised nearly $79 million in initial investment. CSOP Asset Management’s bitcoin and ether futures ETFs raised $58.9 million and $19.7 million, respectively, ahead of their listing, the Hong Kong-based group said in a statement. ETFs give city investors access to cryptocurrency futures traded on the Chicago Mercantile Exchange.

The launch is a crucial component of Hong Kong’s plan to become a crypto hub and comes despite the collapse of Sam Bankman-Fried’s FTX exchange, plunging digital asset prices, and signs of trouble across the industry.

Several major Asian cryptocurrency groups have already run into trouble following the FTX implosion, with Hong Kong exchange AAX halting withdrawals and Singaporean lender Amber putting expansion plans on hold.

Hong Kong-based cash-for-crypto shop Genesis Block, which was partly owned by FTX subsidiary Alameda Ventures, shut down its trading portal last month and stopped accepting deposits.

Both ETFs opened at HK$7.77 ($1) per unit on Friday. The bitcoin futures ETF settled at around HK$7.785 at midday, while the ether ETF was at HK$7.78 per unit.

Carlton Lai, head of blockchain and cryptocurrency research at Daiwa Capital Markets in Hong Kong, said the $79 million raised initially fell short of expectations. “It really shows the bear market and the current lack of confidence in the asset class,” he added.

Hong Kong’s push to launch cryptocurrency ETFs and make it easier for retail investors to trade digital assets comes after years of tougher regulations than rival financial center Singapore, though the latter recently said it wants to be more tough on bad behavior in the industry.

Julia Leung, who was appointed to head Hong Kong’s Securities and Futures Commission on Thursday, highlighted China’s “pioneering” regulatory approach to cryptocurrency trading. She is a former journalist and currently deputy managing director of the Market Observatory, she will assume the role of first woman to head the regulatory authority in January.

“When other major regions now sing the same tune and establish a more holistic regulatory regime, we see the conditions for more relaxation as we have already [regulations] on the spot,” Leung told a conference last month.

An update to the city’s anti-money laundering law passed last week and scheduled to go into effect next year will require virtual asset service providers to comply with guidelines before receiving a license to operate.

Wilfred Yiu, co-chief operating officer of the Hong Kong Stock Exchange, said the introduction of the ETF would strengthen the city’s role as an international financial center and support “Hong Kong’s continued growth as Asia’s preferred ETF market.”

“We are excited about the opportunities in the virtual resource space,” he added.

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