Surging bitcoin prices following the election of Donald Trump as the next US president have finally given Hong Kong's spot cryptocurrency exchange-traded funds (ETFs) a boost this week, with trading volume surging to a three-month high.
Hong Kong's three ETFs that invest directly in bitcoin this week became active trading targets with about HK$135 million (US$17.3 million) changing hands on Tuesday. On most days since the ETFs launched in April, their total daily trading volume lingered below US$4 million.
The Asian financial centre's ambition to turn into a virtual asset hub is facing increased competition with Trump's return to the White House, as the former president pledged to make the US the "crypto capital" of the world.
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"Historically, the crypto ETFs in Hong Kong were less in the spotlight as most larger institutional investors can simply buy the ones in the US, which are larger and more liquid," said Jeff Mei, chief operating officer of cryptocurrency exchange BTSE.
"The recent surge in interest in Hong Kong indicates that there is more and more demand from local retail investors, wealth managers, and smaller institutional investors who prefer to have their investments denominated in Hong Kong dollars," Mei said.
Former president Donald Trump, now present-elect, spoke at the Bitcoin 2024 Conference on July 27 while courting the crypto community on the campaign trail. Photo: AP alt=Former president Donald Trump, now present-elect, spoke at the Bitcoin 2024 Conference on July 27 while courting the crypto community on the campaign trail. Photo: AP>
Bitcoin, the world's largest cryptocurrency, this week jumped more than 10 per cent to reach an all-time high above US$93,000. The token has gained 35 per cent over the past month as US election polls swung in Trump's favour. The price has nearly doubled so far this year.
Spot bitcoin ETFs in the US this week have drawn more than US$2 billion in inflows.
The correlation with the US election stems largely from the crypto-friendly reputation that Trump fostered on the campaign trail. He previously promised to create a "strategic national bitcoin stockpile" and a more favourable regulatory framework for the industry.
The major movements in crypto prices have "spilled over to Asia", and Hong Kong-listed bitcoin ETFs have seen a similar bump in buying interest following the US developments, said Augustine Fan, head of insights at Hong Kong-based decentralised finance firm SOFA.org.
In late 2022, Hong Kong announced plans to create clearer regulations for virtual assets and court the industry to the city at a time when the US was cracking down on cryptocurrency firms. With the US stance expected to change under Trump, Hong Kong faces greater pressure to maintain its momentum.
Christopher Hui Ching-yu, the city's Secretary for Financial Services and the Treasury, said on Friday that the government will submit a bill to the Legislative Council by the end of the year to regulate issuers of fiat-pegged stablecoins.
The city will also aim to conduct the second round of public consultation for regulating over-the-counter virtual asset trading services next year, and propose a regime for virtual asset custody services, Hui said.
On Friday, the Hong Kong stock exchange launched its virtual asset index series , which offers benchmarks for bitcoin and ether pricing in Asian time zones.
"Hong Kong, given its strong financial and legal systems, will remain the main hub for Chinese investors, and crypto is one asset class that is set to gain from this development," said BTSE's Mei.
This article originally appeared in the South China Morning Post (SCMP) , the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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