Hong Kong Bitcoin ETF issuer rejects ‘pessimistic’ outlook for funds and makes audacious prediction

“Lukewarm.”

“Terribly disappointing.”

“Don’t expect big numbers.”

Those were just a few of the eye-opening reactions to Hong Kong’s Bitcoin and Ether spot price exchange-traded funds, which hit the market on April 30.

Nine days later, the CEO of one the issuers of a crypto ETF delivered a rebuttal against what he called “pessimistic comments.”

“The potential of Hong Kong’s ETFs is more than double that of the US,” said Han Tongli, the CEO of Harvest Global Investments, during a panel discussion at Bitcoin Asia on Thursday.

Come again?

When Hong Kong six crypto ETFs debuted, they drew almost US$13 million, which is 0.3% of the money that gushed into the US Bitcoin ETFs that hit the market in January.

Standing his ground

Despite this monumental imbalance, Han stood his ground before a sceptical audience and made his case.

Hong Kong can outpace the US for two reasons, he contended.

Unlike US funds, Hong Kong’s ETFs permit “in-kind transactions,” which means investors can trade using cryptocurrencies directly. In other words, they can invest into the ETFs with not just fiat, but virtual assets, too.

“We are building a bridge to connect the traditional financial world to the crypto world. The US built a bridge in one direction,” he said on a panel which also featured representatives from OSL and HashKey, which are providing custody services for the ETFs (OSL is working with Harvest and China Asset Management, and HashKey with Bosera).

Han added that the Hong Kong ETFs should appeal to international investors who don’t want to make investments in the US “for reasons we all know.”

He described many non-Western investors as “reluctant” to put money into the nation, which is enduring a blistering regulatory crackdown and a lot of uncertainty around crypto.

Han also evoked Hong Kong’s political status as a special administrative region of China as a possible source of criticism.

“It’s located in China, and we’ve heard many rumours about Hong Kong; many people don’t want to see Hong Kong become more successful,” Han added.

East vs. West

It’s not the first time that the ETF launch has been framed as an East vs. West contest.

Similar comments were made by Gabor Gurbacs, the founder of Pointsville, a gamified rewards platform. Gurbacs said geopolitical ETF competition was “heating up.”

Still, Han was making a bold, and perhaps fanciful argument when you look at the numbers.

Bitcoin ETFs issued in the US have amassed almost $53 billion in assets since their inception a few months ago, according to CoinGlass.

Even so, some market watchers said Hong Kong’s foray into retail-aimed crypto ETFs bears careful consideration.

For starters, Hong Kong’s inflows are just a fraction of those in the US and comparing the two markets does smack a bit like apples and oranges.

Given Hong Kong’s much smaller market size, Bloomberg Intelligence analyst Eric Balchunas said on May 6 that the ETFs were already comparatively as big in the local market as in the US.

“As we advised, don’t expect big numbers in HK vs US,” he advised clients.

Wild card

Mainland Chinese investors are the wild card.

Some executives at the Hong Kong ETF issuers — including Yimei Li, China Asset Management’s CEO — have expressed hope that at some point the ETFs could open up to the Chinese market, where crypto trading is banned.

Analysts, including Balchunas, think this is unlikely and point to the fact that Hong Kong’s ETFs for crypto futures, which launched in 2022, remain inaccessible to mainland Chinese investors.

Other markets

Still, beyond China, issuers are starting to eye other markets — even if local regulators are less than keen on the products.

On May 7, Bosera Fund Management announced it was working with Singaporean fintech company MetaComp to promote the spot ETFs to “investors in Singapore and beyond.”

The Monetary Authority of Singapore warned in January that those choosing to invest in overseas markets should exercise extreme caution.

Callan Quinn is DL News’ Hong Kong-based Asia Correspondent. Get in touch at callan@dlnews.com.