From theblock by Danny Park

Hong Kong’s spot cryptocurrency exchange-traded funds are expected to have a much brighter future in 2025, Hong Kong-based crypto exchange OSL’s Managing Director Ryan Miller said. 

In April 2024, Hong Kong saw the debut of six spot bitcoin and ether ETFs following the successful launch of U.S. bitcoin ETFs. While Hong Kong is the first and remains the only region in Asia to list spot crypto ETFs so far, some have evaluated these ETFs as underwhelming. The spot bitcoin ETFs have amassed 4,560 BTC ($444.6 million) as of Dec. 11, while the region’s ether funds held 16,280 ETH ($59.6 million).

Compared to their Hong Kong counterparts, U.S. spot crypto ETFs experienced record-setting volume and inflows, which increased even further as pro-crypto Donald Trump was reelected as U.S. President. U.S. spot bitcoin funds have amassed a cumulative net inflow of over $34.06 billion as of early December, while spot ether ETFs saw over $1.78 billion.

Gary Tiu, executive director of OSL, said at the Foresight 2024 conference in August that Hong Kong crypto ETFs face a systemic market obstacle due to the local financial structure's rich layer of intermediaries, such as brokers and banks, in dealing with funds and structured products. Chen Zhao, digital assets director of Fosun Wealth, also said that there is a lack of dealers and brokers in Hong Kong willing to deal with such crypto ETFs.

“In my opinion, the performance of a product should not be judged by a single figure or factor,” Miller said. The OSL executive pointed out that in terms of the crypto ETFs’ ratio to the respective equity markets, the U.S. and Hong Kong crypto ETFs have performed similarly.

Miller noted that spot crypto ETFs in the U.S. are valued at around $5.47 billion, which equates to 0.019% of the combined NYSE and Nasdaq market capitalization, while the size of Hong Kong's spot crypto ETF market is approximately $351.24 million, representing 0.023% of the Hang Seng Index's market cap of $1.52 trillion.

The OSL executive said he expects to see “substantial growth” in trade volumes and inflows from Hong Kong ETFs in the coming year, as the funds experience heightened activity due to positive sentiments both globally and locally. OSL claims to be Hong Kong’s largest custodian of local spot crypto ETFs with over 70% market share.

“The new U.S. administration's favorable stance toward the crypto industry, coupled with interest rate cuts, has positively impacted global sentiment and cryptocurrency prices,” Miller said. 

On Dec. 6, Hong Kong spot crypto ETFs saw a total trading volume of over $58 million, its highest yet. While it has fluctuated, the average trade volume has increased since the reelection of Donald Trump as U.S. President.

Miller explained that the Hong Kong government is also continuing crypto-friendly efforts in regulation, introducing initiatives such as waiving taxes on investment gains from cryptocurrencies for hedge funds and private equity firms.

“With ongoing regulatory support and growing investor interest, Hong Kong's crypto ETFs are well-positioned to thrive in the evolving global crypto landscape,” Miller also said.