According to a Bloomberg Intelligence report, in-kind launches and redemptions for spot bitcoin ETFs are anticipated to be permitted by Hong Kong’s financial regulator, the Hong Kong Securities and Futures Commission (SFC), in the second quarter of this year.
After the SFC stated in December that it was prepared to consider such products, another company, Venture Smart Financial Holdings, also stated it would make a filing. In January, Chinese asset manager Harvest Global applied for a spot bitcoin ETF.
According to Bloomberg Intelligence ETF expert Rebecca Sin, even though no spot ETF has been approved yet, it appears likely that it will happen soon.
A significant change from the cash-only redemptions for the U.S. spot-based products is that the SFC will permit in-kind redemptions in addition to those approvals, according to Sin.
ETFs typically utilise in-kind redemptions because there is no need to sell the underlying asset. As a result, for financial, tax, and liquidity reasons, issuers and investors favour it.
However, cash redemptions limit the exchange of ETF shares to cash, which typically entails more expensive trading and tax implications.
Noelle Acheson, the creator of the newsletter “Crypto is Macro Now,” stated that it would be “huge” if Hong Kong did, in fact, permit in-kind redemptions for spot bitcoin ETFs.
According to her, “the volume of the Asian cryptocurrency market is far larger than that of the U.S.” According to listed exchange-traded funds (ETFs) in Hong Kong, a sizeable portion of capital may be channelled into ‘authorised’ portfolio allocation. This could indicate that there is less ‘new money’ entering the ecosystem or that people in the area are more familiar with cryptocurrency assets.
Acheson stated that it would be noteworthy if even a small portion of Chinese investors were able to invest in bitcoin legally.