The Hong Kong Securities and Futures Commission (SFC) has recently announced that it is open to receiving applications for cryptocurrency exchange-traded funds (ETFs) that track spot prices of digital assets such as Bitcoin. This is a significant development for the crypto industry in Hong Kong, as it could pave the way for more institutional and retail investors to access the emerging asset class.
According to media reports, up to 10 asset managers are already preparing to launch crypto spot ETFs in Hong Kong, following the SFC’s guidance. Some of them have already filed their applications, while others are in the process of doing so. These asset managers include global firms such as Fidelity and Invesco, as well as local players such as HashKey and Arrano Capital.
Crypto spot ETFs are different from crypto futures ETFs, which are already available in some markets such as the US and Canada. Crypto spot ETFs track the actual prices of cryptocurrencies on spot exchanges, while crypto futures ETFs track the prices of contracts that bet on the future prices of cryptocurrencies. Crypto spot ETFs are generally considered to be more accurate and transparent, as they reflect the real-time supply and demand of the underlying assets.
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However, crypto spot ETFs also face more regulatory challenges, as they require the ETF providers to ensure the safe custody and security of the digital assets. The SFC has issued a set of requirements for crypto spot ETFs, such as having a minimum fund size of HK$100 million, appointing qualified custodians with insurance coverage, conducting independent audits, and disclosing the risks and fees associated with the products.
The SFC has also stated that it will only consider applications for crypto spot ETFs that track a basket of cryptocurrencies with at least 10 constituents, and that no single constituent can exceed 40% of the basket’s weight.
This is to ensure diversification and reduce concentration risk. The SFC has also indicated that it will not approve crypto spot ETFs that track privacy-oriented coins such as Monero or Zcash, as they pose higher risks of money laundering and terrorist financing.
The launch of crypto spot ETFs in Hong Kong could have a positive impact on the crypto market, as it could attract more capital inflows, enhance liquidity, and improve price discovery. It could also boost Hong Kong’s competitiveness as a leading financial hub in Asia, as it could offer a wider range of investment options for both local and international investors.
However, crypto spot ETFs are not without risks, as they are subject to the volatility and uncertainty of the crypto market, as well as the regulatory and operational risks of the ETF providers and custodians. Therefore, investors should exercise caution and due diligence before investing in these products.
Invesco Galaxy files registration for spot Bitcoin ETF
Meanwhile, in a major development for the crypto industry, Invesco Galaxy has filed a registration statement with the U.S. Securities and Exchange Commission (SEC) for its spot Bitcoin ETF. The proposed fund, named Invesco Galaxy Bitcoin Trust, will invest directly in Bitcoin and provide exposure to the price movements of the leading cryptocurrency.
The filing comes at a time when the SEC has approved several Bitcoin futures ETFs but has not yet given the green light to any spot Bitcoin ETFs. A spot Bitcoin ETF would track the actual price of Bitcoin, rather than the price of Bitcoin futures contracts traded on regulated exchanges. This would potentially offer investors a more accurate and cost-effective way to access the crypto market.
According to the filing, Invesco Galaxy Bitcoin Trust will use Coinbase Custody Trust Company as its custodian and will obtain its Bitcoin price data from Bloomberg. The fund will charge a 0.65% annual fee, which is lower than the fees of most Bitcoin futures ETFs. The fund will also seek to minimize the tracking error between its net asset value (NAV) and the market price of Bitcoin.
Invesco Galaxy is a joint venture between Invesco, a global asset manager with over $1.5 trillion in assets under management, and Galaxy Digital, a diversified financial services firm focused on digital assets and blockchain technology. The partnership aims to leverage Invesco’s expertise in ETFs and Galaxy’s leadership in crypto innovation.
The filing of Invesco Galaxy Bitcoin Trust marks another milestone in the quest for a spot Bitcoin ETF in the U.S., which many investors and industry experts believe would boost the adoption and legitimacy of crypto assets. However, the SEC has been cautious and skeptical about approving such a product, citing concerns over market manipulation, investor protection, and regulatory oversight.
It remains to be seen whether Invesco Galaxy’s spot Bitcoin ETF will receive a favorable response from the SEC, or whether it will face the same fate as many previous applications that have been rejected or withdrawn. The SEC has until 75 days after the filing date to make a decision, unless it extends the review period. In any case, Invesco Galaxy’s move signals that the demand and interest for a spot Bitcoin ETF is still strong and growing.
Standard Charter Bank says Bitcoin??could see $50-100 billion in spot ETF inflows upon approval in 2024
One of the most anticipated events in the crypto space is the approval of a Bitcoin spot exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC). A Bitcoin spot ETF would allow investors to buy and sell shares of a fund that holds actual bitcoins, rather than derivatives or trusts. This would provide more exposure, liquidity and legitimacy to the leading cryptocurrency.
According to a recent report by Standard Charter Bank, a global financial institution, a Bitcoin spot ETF could attract $50-100 billion in inflows in the first year of its launch. The report estimates that the total market capitalization of Bitcoin could reach $1.8-2.4 trillion by 2024, assuming a spot ETF approval and a moderate increase in institutional adoption.
The report also compares the potential impact of a Bitcoin spot ETF to that of a gold ETF, which was launched in 2004 and boosted the demand and price of the precious metal. The report argues that a Bitcoin spot ETF would have a similar effect, as it would lower the barriers to entry and increase the accessibility and transparency of the crypto market.
The report acknowledges that there are still some challenges and uncertainties regarding the regulatory approval of a Bitcoin spot ETF, such as the lack of clear rules, the volatility and security risks of the crypto market, and the potential competition from other crypto products. However, the report also notes that there are some positive signs, such as the growing interest and involvement of institutional investors, regulators and policymakers in the crypto space.
The report concludes that a Bitcoin spot ETF would be a game-changer for the crypto industry, as it would enhance the credibility, liquidity and efficiency of the market. The report also suggests that investors should prepare for this scenario, as it could have significant implications for the valuation and adoption of Bitcoin.