The race for the introduction of Hong Kong's first crypto futures ETF for retail begins

Provider of stock exchange-traded funds are busy submitting applications for the introduction of retail-oriented crypto futures ETFs after the local regulatory authority has announced that it would open the door.

to be one of the first that note a retail crypto futures ETF on the local stock exchange will be particularly crucial in view of the narrow bandwidth of permissible underlying underall values, which are described in a circular of the securities and futures commission, according to experts.

according to Rocky Mui, a partner of the law firm Clifford Chance based in Hong Kong, who worked closely with issuers in the ETF industry, the announcement "A lot of interest, lots of noise".

Richard Douglas, Chief Executive from Saxo Markets in Hong Kong, said his company has a wide range of crypto exchange products from third-party providers who were available to be available to be able to offer a number of them private investors in Hong Kong.

The Saxo website lists some crypto-borns and ETPs, including CoinShares ’Ethereum Tracker EUR XBT Provider and Bitcoin Tracker EUR XBT Provider Etns, Vaneck Bitcoin and Ethereum Etns and 21Shares’ Crypto Basket Index Etp.

"There are a number of crypto ETPS [on our shelf] that we believe that they fall into the existing definition as shown [in the SFC Circular] and will therefore be submitted shortly," said Douglas.

fidelity International, which last month as the first major global fund company professional investors from Hong Kong offered an ETP, which was physically laid by Bitcoin, rejected whether it had specific plans to apply for a crypto-futures ETF for retail.

According to Emma Pecenicic, head of digital offers and partnerships in the Asia-Pacific region, ex-Japan, the company observes the development of cryptocurrencies as part of a more comprehensive exploration of the potential for digital assets.

Vivien Wong, General Manager at New Huo Asset Management, a fund for virtual assets, said that the company is in discussions with ETF-specific asset managers about possible cooperation to launch a crypto-futures ETF for retail in Hong Kong.

Joy Lam, specialist for virtual assets at the law firm Baker McKenzie from Hong Kong, said that there has been a strong interest of managers in Hong Kong for some time.

"Probably about 15 months ago we received calls from some of the more traditional fund managers about the possibility of crypto ETFs and other cryptofocussed products," said Lam.

The SFC circular states that asset managers who want to receive an official approval must demonstrate a proven experience of at least three years in the administration of ETFs. As a result, many actors are now striving for partnerships between an established traditional asset manager and a new cryptofocussed company.

"The truth is that many of the crypto native or crypto-focused fund managers do not really have the necessary experience with public funds that is necessary," said Lam.

On the other hand, when it comes to crypto expertise, not many traditional asset managers have the required balance sheet or people in their teams with “significant experience” with investments in virtual assets to overcome market faults, she said.

The greater challenge for players who want to put on a retail crypto futures ETF are the restrictions set by the SFC in which these funds can invest, whereby only Bitcoin futures and ether futures that are traded on the chicago mercantile Exchange are permitted.

Experts wonder how many products the Hong Kong market can really support if the palette of permissible underlying is so tight.

"With this tight range in relation to your scope of investment or your strategy, it will be very difficult if you are not one of the first couples who are approved," said Lam.

fund companies could also be exposed to the competition by foreign actors who are drawn from crypto products for retail according to Hong Kong due to the openness of the SFC.

lam has received calls from a small number of foreign companies that have introduced products in the USA and Europe, but are not present in Hong Kong or Asia.

"When they saw the news that Hong Kong wanted to allow crypto futures ETFs, they were on the phone very quickly," she said.

*Ignites Asia is a intelligence service published by FT Specialist for experts who work in the asset management industry. It covers everything, from the introduction of new products to regulations and industry trends. Test versions and subscriptions are available at Ignitesasia.com .