- Gary Tiu highlights lack of incentives for brokers to push ETFs in Hong Kong due to higher commissions elsewhere.
- Crypto ETFs face skepticism in Hong Kong; regulators and financial institutions deem them high-risk, impeding growth.
In Hong Kong, the burgeoning crypto ETF sector is grappling with obstacles within the traditional financial ecosystem. Gary Tiu, OSL’s Executive Director, has pointed out the specific challenges that these funds face, primarily due to the local market’s structure and the preferences of financial brokers.
Brokerage Bias Limits Crypto ETF Expansion
Tiu explains that despite the availability of ETFs to all market participants, the preference for structured products remains high among brokers due to more attractive commission rates. This disparity in commission structures significantly stifles the growth and popularity of ETFs in Hong Kong’s financial markets.
Further complicating the situation is a prevailing skepticism towards cryptocurrencies such as Bitcoin and Ethereum. According to Tiu, regulatory bodies and financial institutions categorize these crypto ETFs as high-risk investments. This perception contributes to the hesitancy among traditional financial players to engage with or promote these innovative investment vehicles.
Chen Zhao, Director of Crypto Assets at Fosun Wealth, corroborates this view, noting the limited engagement from financial entities both from the West and China. The scale of Hong Kong-based institutions does not match up to these financial behemoths, which further dilutes the potential customer base for crypto ETFs in the region.
Uncertain Future for Hong Kong’s Crypto ETFs
As of mid-August, the total net asset value of crypto ETFs in Hong Kong stands at a modest $310 million, with a daily trading volume averaging around $2.8 million.
Unlike in the United States, where transactions based on physical Bitcoin count as cash inflows, Hong Kong’s market structure does not acknowledge such transactions, further dampening growth prospects.
