Singapore and Hong Kong’s crypto goals on track despite challenge from US Bitcoin ETFs

A decade in the making, crypto ETFs are seen as game-changers as investors need not buy or hold the digital coins but could gain from exposure to their market value, providing a major boost to the crypto industry.

Hong Kong must step up spot crypto ETF approvals after US launch, insiders say

Droves of global crypto industry players have flocked to Singapore and Hong Kong over the past year or so following a US regulatory crackdown on the crypto industry. The ETF launch has, however, revived interest in the US crypto market.

“There will be returns given Silicon Valley and digital hubs are still quite strong in the US. But most of the people are taking a wait-and-see attitude before making a beeline back into the US,” said Danny Chong, co-founder of Tranchess, a tracking protocol that provides yield-enhancing solutions for crypto assets.

“I do foresee Asia continuing to have a bit more advantage or a smooth path, and having people working in this space,” he added.

The ETF announcement comes after the SEC previously imposed fines and other penalties against errant crypto-lending firms. Officials of major banks have also issued policy statements indicating their tough stance on credit access for crypto firms.

In contrast, Singapore and Hong Kong have over the past few months been easing rules for the granting of licences to crypto players and outlining plans to boost the growth of digital assets in their financial ecosystems.

Hong Kong is preparing for the introduction of a spot Bitcoin ETF as Harvest Fund Management, a major asset management company in China, has reportedly submitted the first application to the Securities and Futures Commission of Hong Kong.

The SFC has said it is ready to consider spot crypto ETFs, signalling a shift in the region’s approach. This follows the growing interest in Bitcoin ETFs globally, following the US giving a go ahead.

Hong Kong’s guidelines are expected to be similar to that of the US. The potential listing of the first Bitcoin ETF on the Hong Kong Exchange is expected within a few months.

Asia-US market synergy

Earlier this month, Hong Kong’s central bank outlined its plans for making the city’s banking institutions among the first to fall in line with international standards for reserve requirements for crypto assets.

Several crypto players’ operations are split between the US and Asia because each market fulfils a different need, said Tascha Punyaneramitdee, CEO and founder of INIT Capital, an investor in early-stage tech companies.

While many crypto developers are moving to Asia because of friendlier regulations and new funds being created in the region, the US has a strong existing network and liquidity that make it attractive for firms to maintain a presence there, Punyaneramitdee said.

“The significant movement is more towards Asia but a lot of the projects, companies and funds are aware that they should have at least some presence in the US to make sure they can tap into the network in the US,” she added.

Hong Kong proposes crypto reserve requirements aligned with global standards

Overall sentiment among crypto investors has improved as the US Federal Reserve is expected to start cutting interest rates in the second half of the year. In addition, there is an anticipation of “bitcoin halving”, or halving the supply of new bitcoins in circulation, which would in turn lead to a boost in prices.

Considered one of the most significant events in the crypto calendar, bitcoin halving has occurred in the past every four years, with the last one in May 2020.

Ryna Lee, chief analyst at Bitget Research, said the next halving is expected to occur in April this year.

“Bitcoin’s fourth halving is coming soon and the market is confident that the price of bitcoins will reach a record high after this halving. At the same time, the Federal Reserve will also start an interest-rate cut cycle this year, which is a good signal for risk assets and emerging markets,” Lee said.