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Some of the most striking issues that affect Hong Kong crypto ETFs are reported as follows by insiders. This comes as the financial hub seeks to establish itself as a global hub in the digital assets market despite existing systematic hurdles in the launch of Hong Kong crypto ETFs. These issues were voiced by Gary Tiu, the Executive Director and Head of Regulatory Affairs at the Hong Kong-based OSL crypto exchange at the Foresight 2024 conference which took place on August 11, 2024.
Systemic Market Challenges in Hong Kong
The financial markets of Hong Kong are known for the solid structure, and such structure has become a bane rather than a boon for innovative crypto ETFs. This Gary Tiu categorizes one of the key challenges as the high level of intermediaries’ involvement in the Hong Kong equity market. Such players, brokers banks, and other private financial institutions tap a lot of their revenues from marketing unlisted financial products. Therefore, they do not have a motive to push for the ETFs since the commissions they earn from this kind of trading is much relatively lesser.
Tiu expanded on this, explaining, “In Hong Kong, the incentive system is skewed against ETFs as a financial product. Brokers, who play an integral role in the distribution of financial products, only make a few basis points of commission from ETFs—up to 2% less than what they would earn for structured products. ” This lack of financial incentive among the brokerage houses puts up a structural barrier to the development of the crypto ETFs
Negative Bias Against Cryptocurrencies
Besides, structural issues related to the trading market, Hong Kong-based crypto ETFs experience a serious problem – people’s prejudice against cryptocurrencies, especially bitcoin and ether. Such a negative sentiment is even present reportedly not only in regulators but also within the entities of the financial industry, as it has been identified by Tiu. Unlike other regions, Hong Kong’s approach towards the embracing of digital assets is still conservative and reserved.
Tiu highlighted that “Currently there is still much prejudice in the view of both the authorities and financial organizations in Hong Kong – bitcoin ETFs are seen as a separate type of risk that needs increased attention. ” This negative attitude serves as an obstacle to the expansion of crypto ETFs in the region. As the rest of the world gradually warms up to digital assets, financial markets in Hong Kong is tight-lipped hence negatively influencing the progress of the sector.
Limited Participation from Market Players
Another important reason for the slow development of Hong Kong-based crypto ETFs is market players’ multiplier effect. Digital Assets Director of Fosun Wealth, Chen Zhao issued that there are woefully few brokers and dealers interested in crypto ETFs. He noted that there are three main categories of market participants in Hong Kong: There are Western institutions, Institutions based in China and Institutions of Hong Kong and its vicinity.
Zhao pointed out that Chinese brokers and dealers might avoid trading with crypto products either because the regulators or they decided not to. In the same manner, local financial institutions experience market confinement where on the other hand, western dominated financial institutions prefer engaging in US ETFs due to higher fees and convenient market entry. It also means that only a small part of the Hong Kong-based participants can prop up the local crypto ETFs, Zhao claimed, which he asserted is “very little” in comparison to the major groups.
Major Takeaway on Hong Kong Crypto Challenges
Thus, the issues of Hong Kong crypto ETFs are both systemic and negative biases, as well as low participation in the market. Despite the region’s ambitions to become home to the digital asset market, these barriers are still present to affect development of cryptocurrency ETFs. This is with consideration to the fact that industry leaders such as Gary Tiu and Chen Zhao are still pointing at such issues as risks; it will be important for the regulators and the players in the market to come up with real and working solutions meant to enhance the take-off and acceptance of the Hong Kong crypto ETFs.
For now, the possibilities of these financial instruments will not be developed greatly in the region. Keep following Turkishnyradio for more Hong Kong crypto market updates.
