Despite a rising tide of enthusiasm for cryptocurrency investments in the United States, demand for Hong Kong’s cryptocurrency-focused exchange-traded funds (ETFs) has shown limited movement, even as Bitcoin’s price has surged in recent days.
Hong Kong’s three spot Bitcoin ETFs reported trading volumes of US$3.65 million on Tuesday and US$2.22 million on Wednesday, according to data from OKG Research, a research arm of the blockchain company OKG Technology Holdings, listed in Hong Kong. Since their debut in April, these ETFs have maintained an average daily volume of approximately US$3.25 million.
In stark contrast, the U.S. market saw significantly higher trading activity on Wednesday, with a total of US$4.74 billion exchanged among 12 spot Bitcoin ETFs. BlackRock’s iShares Bitcoin Trust, the largest fund of its kind in the U.S., alone accounted for a substantial US$3.36 billion in trades in a single day, as reported by data provider The Block.
This disparity in interest is further highlighted by inflows, with Hong Kong’s Bitcoin ETFs drawing HK$3.18 million on Tuesday and HK$4.28 million on Wednesday. In the U.S., however, Bitcoin ETFs amassed an impressive US$870 million in inflows over the same period.
Bitcoin’s recent price increase, up by 7.84% over the past five days and 12% over the past month, has coincided with political endorsements from U.S. presidential candidates, including both Donald Trump and Kamala Harris, who have expressed support for the digital asset sector.
Hong Kong has made a concerted effort to balance industry development and regulatory oversight in its virtual asset sector since late 2022. As part of this approach, the city became the first major financial market to approve ETFs that directly invest in Ethereum, the second-largest cryptocurrency. However, some in the industry have voiced concerns about regulatory requirements, describing them as costly or unnecessarily complex.
The regulatory landscape has faced some turbulence as several prominent cryptocurrency exchanges withdrew their license applications in response to the current regulations for virtual asset trading platforms. Complaints have also arisen around the perceived ambiguity in Hong Kong’s draft rules for over-the-counter virtual asset trading services.
During Hong Kong’s annual FinTech Week, the Securities and Futures Commission (SFC) reaffirmed its commitment to developing the virtual asset market while striving to prevent investors from turning to unregulated trading venues. Eric Yip Chee-hang, the SFC’s new executive director of the Intermediaries Division, underscored this sentiment, remarking on the challenges that regulated platforms face in attracting investors.
“We need to keep ourselves on our toes as a regulator,” Yip said on Monday, acknowledging that the SFC’s efforts would need to be reviewed if liquidity in virtual assets continues to concentrate within unregulated venues and if regulated entities struggle to maintain sustainable business models.
As Hong Kong faces a modest demand for its crypto ETFs, the SFC’s response to industry feedback and its willingness to consider new regulatory strategies could shape the future of its crypto market, especially as the global appetite for digital assets continues to rise.
