Hong Kong has officially approved the first wave of spot Bitcoin exchange-traded funds (ETFs), which are scheduled to start trading on April 30. The Securities and Futures Commission (SFC), the city's financial regulator, announced the approval on April 24.

According to the announcement, the first batch includes China Asset Management's (ChinaAMC) Bitcoin ETFs. Thomas Zhu, head of digital assets at ChinaAMC, highlighted the advantages of the ETFs in the official press release: “The in-kind feature also attracts coin holders by offering the ease of converting coins to fully regulated ETFs managed by professional fund managers and regulated custodians."

The launch will see three Bitcoin ETFs available to both retail and institutional investors, offering a regulated framework for investment in the underlying digital assets. Unlike the cash-creation model used by the United States, Hong Kong's ETFs will operate on an in-kind creation model. This allows for the creation of new ETF shares using actual BTC, which could lead to an increase in assets under management (AUM) and trading volume for these products.

Bloomberg ETF analyst Rebecca Sin explained the potential opportunity presented by the in-kind model, stating, "Hong Kong is aiming for in-kind creation of the ETF, unlike the US, where the transaction is cash only...This could be an opportunity for the market."

The launch could also trigger a competitive environment regarding fees. Bloomberg's James Seyffart suggested a possible fee war, noting that "Harvest coming in hot with a full fee waiver and the lowest fee at 0.3% after waiver.” Senior ETF analyst Eric Balchunas commented on the fees being lower than expected as a positive sign.

Meanwhile, local asset management firm HashKey Capital confirmed that its Bitcoin ETF will also commence trading next Tuesday. OSL, a digital asset platform acting as a sub-custodian, indicated that spot bitcoin products are expected to launch by late April.

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