Hong Kong has led the Asia Pacific region in the development of crypto exchange-traded funds since the city introduced guidelines for tokenised funds in 2023, according to Emma Pecenicic, head of digital propositions and partnerships, Asia Pacific ex-Japan, at Fidelity International.
The guidelines include disclosures to make fund holdings more transparent, and came five years after the Securities and Future Commission formulated a regulatory approach for virtual assets in 2018.
While it took “a bit of time” to finalise details such as distribution of virtual asset-related products, Pecenicic is optimistic that the guidelines will help Hong Kong to capitalise on growth of the global tokenised asset market.
“The city’s crypto ETF market has been growing robustly over the past two years,” Pecenicic, who is also a board member of the FinTech Association of Hong Kong, says in an interview with Asia Asset Management.
A total of 18 bitcoin and ether spot, futures and inverse ETFs and exchange-traded products were listed on the Hong Kong bourse in the last two years.
US investment consulting firm Boston Consulting Group estimates that tokenised assets worldwide will roughly triple from US$600 billion this year to $18.9 trillion in 2033, including $2 trillion from cypto funds.
Pecenicic describes 2024 as a “pivotal year” for global crypto ETFs, highlighted by approval for the first batch of bitcoin ETFs in the US, including Franklin Bitcoin ETF and Valkyrie Bitcoin ETF.
“It was the most successful launch in history. The US crypto ETF market has reached $100 billion,” Pecenicic says.
But she observes that crypto ETFs in Asia Pacific markets such as Hong Kong, Australia and Japan lag far behind the US as local investors still prefer US funds.
Retail investor participation in the region is also low and financial regulators are working to bolster investor education. In Hong Kong, for instance, Pecenicic notes that retail investors have to receive risk assessments to buy virtual asset ETFs.