Will Hong Kong become the world's second-largest spot Bitcoin ETF market?
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Will Hong Kong become the world's second-largest spot Bitcoin ETF market?
Insiders revealed: In addition to southbound funds, $10 billion in new capital will flow into Hong Kong's spot Bitcoin ETF market.
Navigating Web3 tides with focused insightsBy Zhou Zhou, Foresight News
Hong Kong’s spot Bitcoin ETFs have arrived, and industry insiders believe it could become the world's second-largest spot Bitcoin ETF market after the United States.
On April 15, 2024, Harvest Fund Management (International), ChinaAMC, and Bosera Asset Management (International) announced that their applications for spot Bitcoin and Ethereum ETFs had been approved by the SFC (Securities and Futures Commission of Hong Kong). This marks another major milestone in the ETF space following the U.S. approval of spot Bitcoin ETFs on January 11, 2024, accelerating the inflow of capital from traditional Asian financial markets into cryptocurrencies such as Bitcoin and Ethereum.
OSL CEO Pan Zhiyong told Foresight News: "Investors are expected to be able to officially purchase spot Bitcoin ETFs from these three fund companies by the end of April, just like buying regular stocks." Representatives from VDX and HashKey Exchange also confirmed this information to Foresight News, stating that unless unexpected circumstances arise, investors will most likely be able to buy Hong Kong's spot Bitcoin ETFs between April and May.
Regarding the specific timeline for Hong Kong's spot Ethereum ETF, Pan Zhiyong told Foresight News: "After spot Bitcoin ETFs have traded for a period of time, spot Ethereum ETFs can then officially begin trading." Foresight News consulted multiple CEOs of licensed (or applying for license) exchanges in Hong Kong, with some indicating it would be several weeks after the launch of Bitcoin ETFs, while others suggested one month after their release.
The approval of spot Bitcoin ETFs in Hong Kong is seen by many professionals as an event second only to the U.S. approval of Bitcoin ETFs. Previously, markets such as Canada, Germany, and Switzerland were far below Hong Kong in terms of potential capital ceiling. Particularly regarding whether southbound funds (from mainland China) can access Hong Kong’s spot Bitcoin ETFs, some industry insiders told Foresight News that it is possible.
Foresight News reached out to executives at several Hong Kong-based crypto exchanges about whether southbound capital can enter Hong Kong’s spot Bitcoin ETFs, but received mixed responses.
This issue is considered crucial—once southbound funds are permitted to invest in Hong Kong’s spot Bitcoin ETFs, it would open a window for mainland Chinese capital, meaning both the U.S. and China—the two countries with the largest GDPs globally—would have allowed massive pools of capital accumulated within their respective financial systems to flow into Bitcoin investments this year. This could directly determine whether Hong Kong becomes the world’s second-largest cryptocurrency financial hub after the U.S. Of course, mainland investors currently cannot yet purchase Hong Kong’s spot Bitcoin ETFs.
$500 million, $1 billion, or $10 billion?
How much capital—$500 million, $1 billion, or even $10 billion—can Hong Kong’s spot Bitcoin and Ethereum ETFs attract? Industry opinions vary.
"We expect around $1 billion worth of capital to flow into Bitcoin within a few months," said Wayne Huang, ETF project lead at OSL, a licensed Hong Kong cryptocurrency exchange, to Foresight News.
Jupiter Zheng, Partner at HashKey Capital responsible for secondary market funds and research, offered a similar estimate: "It should reach at least over $1 billion in scale, primarily targeting traditional institutions, family offices, high-net-worth individuals, and native digital asset users."
This figure is often compared against flows seen in U.S. spot Bitcoin ETFs, which attracted $10 billion in capital within just two months—an influx that shocked global financial markets. In contrast, the first gold ETF took three years to achieve the same level of inflows, highlighting the strong demand among traditional financial markets to gain exposure to Bitcoin.
Paolo from VDX, a Hong Kong-licensed crypto exchange, stated: "Hong Kong's spot Bitcoin ETF will attract $10 billion in capital this year—but not from southbound funds, rather from other sources."
Despite repeated inquiries, Paolo did not disclose specifics about which major incremental market he referred to. However, he reiterated his forecast that Hong Kong’s spot Bitcoin ETFs would draw $10 billion in capital by year-end.
However, some industry participants remain more conservative in their expectations. Eric, an ETF analyst at Bloomberg, believes inflows may hover around $500 million.
Eric’s analysis holds merit. Currently, the U.S. ETF market exceeds $8 trillion in assets under management, whereas Hong Kong’s ETF market stands at approximately $52 billion—just 1% of the U.S. size, a significant gap. Europe ranks second globally in ETF market size with over $1 trillion. Across Asia, Japan leads with $533.8 billion in ETF assets as of end-2023, followed by South Korea at $91.3 billion.
In the author’s view, for Hong Kong’s spot Bitcoin ETF to attract more than $1 billion, two key factors matter: whether southbound capital can participate, and whether funds from other Asian regions such as Japan and South Korea can be channeled into Hong Kong.
On the topic of southbound capital, Wayne explained: "According to Hong Kong regulations, as long as funds are already in Hong Kong, they can buy spot Bitcoin ETFs on the secondary market—but not directly through mainland brokers."
Still, some industry players believe there is potential for substantial southbound capital inflows into Hong Kong’s spot Bitcoin ETFs.
A senior industry insider who wished to remain anonymous noted: "Whether it’s ChinaAMC (Hong Kong), Harvest International, or Bosera Fund—all are Hong Kong-based funds with Chinese mainland backgrounds. There was also a Hong Kong-originated fund planning to launch but ultimately didn’t proceed with a spot Bitcoin ETF. That sends a very clear signal."
How Can Hong Kong Become the World’s Second-Largest Spot Bitcoin ETF Market?
"Hong Kong will undoubtedly become the world’s second-largest spot Bitcoin ETF market after the U.S.," said Paolo.
Multiple sources revealed to the author: "From Q3 to Q4 last year, institutions including HashKey, OSL, and Victory Securities began laying the groundwork for Hong Kong’s spot Bitcoin ETFs."
As previously reported by Foresight News in its article “Hong Kong Brokers Rush Into Crypto”: "An increasing number of Hong Kong brokerage firms are expanding into cryptocurrency services, including Futu Securities, Tiger Brokers, Victory Securities, Interactive Brokers, Nan Hua Securities, Longbridge Securities, Fuqiang Securities, and Wah Fu Kin Yat Securities."
On one hand, investors will soon be able to directly purchase virtual assets like Bitcoin via these brokerages or licensed crypto exchanges such as HashKey Exchange and OSL. On the other hand, they can hold virtual assets indirectly by purchasing spot ETFs for Bitcoin and Ethereum offered by asset management firms.
"The advantage of the latter is that a large segment of stock investors are accustomed to buying ETF products, so they’ll find it more convenient to opt for spot Bitcoin ETFs," said an industry professional close to Victory Securities in Hong Kong. "Moreover, many financial institutions are only permitted to invest in ETFs—not directly in Bitcoin—so they must gain indirect exposure through spot Bitcoin ETFs."
"The user experience of buying spot Bitcoin ETFs will be as seamless as buying stocks on platforms like Tiger Brokers or Futu Securities," the professional added.
Compared to the U.S., Hong Kong has two distinguishing features in its rollout of spot virtual asset ETFs. First, Hong Kong has approved not only Bitcoin but also Ethereum spot ETFs. Second, Hong Kong allows both cash-settled and physically-backed ETFs.
On the first point, U.S. regulators have not yet permitted spot Ethereum ETFs due to ongoing uncertainty over whether Ethereum qualifies as a security. Hong Kong, operating under different regulatory frameworks, faces no such legal barriers and is expected to approve additional spot ETFs for other digital assets in the future.
On the second point, Paolo from VDX explained: "Physical delivery means you can exchange one BTC for a nearly fixed ratio of Bitcoin ETF shares. In the U.S., investors can only use fiat currency to buy spot Bitcoin ETFs. Physical delivery clearly enhances liquidity and creates new arbitrage opportunities."
"Physical subscription is actually quite friendly to crypto-native investors," said OSL CEO Pan Zhiyong. Compared to the U.S.’s cash-only settlement model, Hong Kong not only bridges the gap between fiat and crypto but also enables circulation between different cryptocurrencies.
"In Hong Kong, you can have coin-in coin-out, coin-in cash-out, or cash-in coin-out," said Wayne.
Of course, Hong Kong’s spot Bitcoin ETFs do face certain disadvantages relative to those in the U.S., particularly higher transaction costs, which will ultimately impact investor experience.
Wayne cited two reasons: "The compliance costs for Hong Kong crypto exchanges are slightly higher than those for U.S. platforms like Coinbase. The SFC mandates insurance coverage for client assets held in custody—the more assets, the higher the premiums, increasing linearly. Additionally, the SFC requires institutions to track virtual asset ETF indices, necessitating paid services from index providers."
"But through our initial strategic partnership with Harvest International and ChinaAMC on spot virtual asset ETFs, we’ve managed to significantly reduce both costs, effectively passing savings on to investors," said Wayne.
"Prices will definitely be kept within a reasonable range acceptable to investors," said Pan Zhiyong.
"Custody and trading fees will be below 0.5%," added Wayne.
Closing Thoughts
Although several countries—including Canada and Germany—have previously launched spot Bitcoin ETFs, some industry observers argue that the U.S. and Hong Kong may be the two most important markets for spot Bitcoin ETFs.
The key metric for evaluating the performance of Hong Kong’s spot Bitcoin ETFs is the volume of capital it attracts. Bloomberg’s ETF analyst considers $500 million optimistic; executives from HashKey and OSL predict at least $1 billion; Paolo from VDX forecasts $10 billion by year-end; and analysts from Matriport suggest inflows could reach $2.5 billion if southbound capital gains access.
Each of these figures reflects different interpretations and judgments based on technical, cultural, and political understandings. Will there be major breakthroughs in cryptocurrency and Web3 technologies? Does Hong Kong possess the foundational strength and determination to seize the Web3 opportunity? And has BTC become a critical factor influencing monetary and financial competition among major powers?
Regardless, the first three months following the launch of Hong Kong’s spot Bitcoin ETFs may serve as a vital indicator of real investor demand.
In the U.S., spot Bitcoin ETFs attracted $10 billion in the first two months and reached $12 billion within four months. Whether Hong Kong can restore its reputation as a leading global—and Asian—financial center through virtual assets will likely be tested decisively in the coming three months.
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