With US ether ETFs imminent, Hong Kong may attract a different crypto crowd

Hong Kong may face fresh challenges as its lead in offering exchange-traded funds (ETF) that invest directly in ether, the world’s second largest cryptocurrency token, may soon disappear with the imminent launch of similar products in the much larger US market, but the city could remain attractive to a specific set of investors it tries to become a virtual asset hub.

With ETFs, similar product offerings in the US may overshadow those in Hong Kong given New York’s much larger trading volumes. However, experts said Hong Kong could still benefit from the upcoming launch.

US spot ether ETFs could increase investor awareness in Hong Kong of Ethereum, the blockchain for ether, according to Deng Chao, CEO of HashKey Capital, a local cryptocurrency firm that worked with Chinese fund house Bosera Asset Management to launch bitcoin and ether ETFs in the city.

Despite being hailed as a major step in the city’s pursuit to become a virtual asset hub, Hong Kong’s spot crypto ETFs have mostly seen meagre turnover compared with bitcoin ETFs in the US.

But the Hong Kong ETFs can still draw in a more narrow set of investors, even with competition from larger players in the US, according to some.

“The Hong Kong market is likely attractive to a specific set of investors, including those who cannot or do not want to access the US market for various reasons,” said Angela Ang, senior policy adviser at blockchain analytics firm TRM Labs.

Several other factors – including interest from investors, the outcomes of the crypto exchange inspections, and the regulation trajectory – are “arguably more important than the launch of crypto ETFs in the US”, Ang said.

US actions will not “set back Hong Kong at all” if the city’s regulators keep sending positive signals and maintain a “welcoming atmosphere for businesses” in the digital asset sector, said Dan Tapiero, founder and CEO of US venture capital firm 10T Holdings.