By Summer Zhen and Samuel Shen
HONG KONG (Reuters) -Six bitcoin and ether exchange traded funds (ETFs) gained in their debuts in Hong Kong on Tuesday, with the three bitcoin ETFs rising more than 2% by midday, boosting Asian investors' enthusiasm for cryptocurrency assets reflects.
The debuts mark the first launch of spot cryptocurrency ETFs in Asia and come just three months after the US launched its first ETFs to track spot bitcoin.
Spot bitcoin ETFs launched by China AMC, Harvest and Bosera were up about 2.6% by midday. The three ether ETFs managed by the asset managers were largely flat.
Bitcoin climbed about 1%.
China AMC said its bitcoin ETF launched with an initial size of HK$950 million ($121 million), the largest among the three issuers.
Cryptocurrency is banned in mainland China, but Hong Kong has promoted itself as a global hub for digital assets as part of a drive to maintain its appeal as a financial center.
Christina Choi, executive director of the Securities and Futures Commission (SFC), called the product debut a milestone in Hong Kong's ETF market, but also flagged risks.
“Virtual assets are quite speculative and highly volatile… so I remind you that such assets are not suitable for all investors,” Choi told the launch event on Tuesday.
The launch of the ETF also put Hong Kong in direct competition with the United States for crypto investors.
U.S. spot bitcoin ETFs have attracted about $12 billion in net inflows, contributing to a surge in bitcoin's price earlier this year. But U.S. regulators have not yet approved ETFs that track ether spot prices.
“The first day inflows are much better than expected,” said Han Tongli, CEO of Harvest Global Investments, adding that Hong Kong should have greater potential than the US in developing crypto assets as it challenges investors can attract both the west and the east. .
In the long term, crypto ETFs have the potential to be available to investors in mainland China if the products are proven to be risk-manageable, Han said.
COMPETITION
Another difference from US crypto ETFs is that Hong Kong adopts the so-called 'in-kind' transaction mechanism, which allows investors to buy and sell ETF shares using the relevant crypto tokens instead of cash.
Such an option should be attractive to investors as token owners “can consider the benefit of holding through the ETFs without the cost of converting to fiat (currency) first,” said Robert Zhan, risk advisory director at KPMG China.
Some analysts expect that most of the initial inflows will come from local retail investors, given the costs.
The management fee of Hong Kong's Cryptospot ETFs, ranging from 0.3% to 0.99%, is much higher than that of current US-listed ETFs, due to the limited number of regulated service providers within the city's strict legal framework .
Currently, Hashkey and OSL are the only two approved trading platforms in Hong Kong.
“In the long term, if Hong Kong SFC approves more participants or trading platforms, costs will become lower and more competitive,” said Alex Chiu, senior strategist of ETF Business at Value Partners.
Bitcoin is up about 50% this year, reaching an all-time high of $73,803 in March. On Tuesday the price was trading around $63,000. Ether is up almost 40% this year.
($1 = 7.8253 Hong Kong dollars)
(Reporting by Summer Zhen and Sam Shen; Editing by Edwina Gibbs and Lincoln Feast.)
