Hong Kong’s securities regulator reportedly approved the in-kind creation model for Bitcoin and Ether ETFs instead of the cash-create model in the United States.
Hong Kong has become the latest country to approve spot exchange-traded funds (ETF) for Bitcoin and Ether, with local regulators issuing approvals to at least three local issuers.
The Hong Kong Securities and Futures Commission (SFC) conditionally approved its first spot BTC and ETH ETFs on April 15, Reuters reported.
At least three offshore Chinese asset managers, including Hong Kong units of Harvest Fund Management, Bosera Asset Management and China Asset Management (ChinaAMC), will launch their spot Bitcoin and Ether ETFs soon.
Bosera will launch its spot crypto ETFs in collaboration with Hong Kong-based HashKey Capital. OSL Digital Securities, a licensed digital asset platform in Hong Kong, will act as the sub-custodian for ChinaAMC and Harvest.
Hong Kong’s securities regulator issues a conditional authorization letter to an ETF application if it generally satisfies its requirements, subject to various conditions, including fee payments, document filing, and the Hong Kong Stock Exchange’s (HKEX) listing approval.
The Hong Kong regulator reportedly approved that the spot Bitcoin and Ether ETFs will be launched as in-kind ETFs, meaning new ETF shares can be issued using BTC and ETH.
The in-kind creation model is opposed to the cash-create redemption model, which allows issuers to create new ETF shares only with cash.
Spot Bitcoin ETFs currently use the cash-create model in the United States as local securities regulators opted for this redemption method.
“The in-kind subscription model for the spot BTC and ETH ETFs in Hong Kong represents a substantial innovation,” OSL board chairman and CEO Patrick Pan told Cointelegraph.
“This mechanism enhances market liquidity by allowing the direct exchange of the asset for ETF shares, reducing reliance on cash settlements and facilitating uninterrupted trading flows,” he added, stating:
“This principle is essential for ensuring market stability and is consistent with practices in both digital and traditional asset ETFs.”
Pan noted that receiving an approval in principle signifies that the firms have cleared most of the crucial vetting processes and brings them closer to the launch.
However, it’s still early to expect when exactly the spot Bitcoin ETF will start trading in Hong Kong, he noted, adding:
“The dates are not yet confirmed. However, all parties involved are diligently working to expedite the launch. The initiation of these ETFs is expected to significantly boost capital inflow into the digital asset market in Hong Kong."
Cointelegraph approached the SFC, Bosera and Harvest for a comment regarding the ETF approval but did not receive a response at the time of publication.
[ZH: This could pave the way for the post-halving rally (and more)...]
Agree.. if Chinese investors start buying and the govt doesn't crack down that could change things but as far as we know the govt ban on bitcoin will incl the ETFs and they DEF won't be on the southbound connect program.
— Eric Balchunas (@EricBalchunas) April 15, 2024
According to reports, HKEX will need roughly two weeks to finalize listing procedures and other arrangements after the SFC’s approval.
