Huobi plans to launch cryptocurrency ETF in Hong Kong

Hong Kong-listed fund manager Huobi Technology plans to launch an exchange-traded fund (ETF) that tracks popular cryptocurrencies. The company, which is a subsidiary of popular cryptocurrency exchange Huobi Global, aims to target retail investors with the planned ETF.

Huobi has written to the Hong Kong Securities and Futures Commission (SFC) and intends to structure the ETF in such a way that it is accessible to retail investors whose total assets are less than HK$8 million (US$1 million). .

The move would be the first avenue for cryptocurrency for retail investors in Hong Kong. Currently, cryptocurrency exchanges operating in the city can only serve professional investors.

Huobi bets on friendlier crypto laws in Hong Kong

The fund manager is betting on an eventual relaxation of the rule for professionals only to invest in cryptocurrencies, Hong Kong newspaper The South China Morning Post reported. It also hopes to receive approval from the ETF, keeping all its operations and redemptions exclusively in the city.

This comes in the face of a bill intended to ban retailers from trading directly in Bitcoin and other cryptocurrencies, a move that would be devastating for cryptocurrency adoption in the city.

But the SFC has also recently relaxed its professional stance on some ETFs, indicating that it may do so for certain cryptocurrency-linked products as well. The main purpose of the SFC is to protect retail investors from market shocks and volatility, something the cryptocurrency market is quite prone to.

Huobi already offers several cryptocurrency-related products for professional investors. It is one of only four fund administrators authorized by the SFC to do so.

While several US and European markets already host cryptocurrency ETFs, the options for retailers to invest in the space are somewhat limited in Asia. But friendlier laws in Hong Kong, a major financial center, could change that notion.

ETFs are also an effective vehicle for attracting more crypto investments, as they allow investors to maintain exposure to the space without directly buying any digital assets.

Is Hong Kong losing its crypto shine?

Hong Kong, once a haven for crypto startups, has lost some of its appeal as a destination for crypto investments. The professionals-only law, coupled with China’s crackdown on cryptocurrencies, has somewhat clouded the outlook for the city’s cryptocurrency potential.

The government was also slow to pass sweeping regulation of cryptocurrencies, a move that resulted in several key players leaving town.

FTX moved the base from Hong Kong to the Bahamas, citing regulatory uncertainty. Crypto.com in 2021 also moved its headquarters from Hong Kong to Singapore, which has been much more welcoming for crypto companies.