Hong Kong Bitcoin & Ethereum ETFs Facing Regulatory Scrutiny: AUM Estimate Lowered to $1 Billion

The highly anticipated launch of Bitcoin and Ethereum Exchange-traded Funds (ETFs) in Hong Kong has hit a roadblock as analysts adjust their estimates for potential assets under management (AUM). Bloomberg analyst Eric Balchunas, in collaboration with analyst Rebecca Sin, has revised the AUM target for the Hong Kong Bitcoin and Ethereum ETFs from $25 billion to $1 billion.

One of the key reasons for this adjustment is the regulatory scrutiny faced by these ETFs in mainland China. Balchunas highlighted that restrictions on virtual asset investments in China may prevent mainland investors from purchasing these ETFs. As a result, the analysts believe that reaching the $25 billion mark within the first two years is unrealistic, leading to a more conservative estimate of $1 billion.

Despite the lowered projection, Balchunas remains optimistic about the $1 billion estimate, considering it a healthy target. However, he emphasized that achieving this goal will depend heavily on improvements in infrastructure. Additionally, he pointed out that alternative investment routes are available for mainland China investors, but these channels may face regulatory challenges.

Earlier discussions by the analyst also indicated that the inflows of Hong Kong Bitcoin and Ethereum ETFs would be lower than expected due to the relatively smaller size of the Hong Kong crypto market compared to the U.S. The restrictions on mainland China investors further compound the challenges faced by these ETFs.

In a positive development, the Hong Kong Securities and Futures Commission (SFC) recently approved the trading of Spot Bitcoin ETFs and Ethereum ETFs, making Hong Kong the first jurisdiction to introduce a Spot Ethereum ETF. This milestone has paved the way for financial institutions like China Asset Management, Bosera Capital, and HashKey Capital Limited to launch Bitcoin and Ethereum ETFs, allowing investors to access these digital assets through ETF shares.

As the industry navigates regulatory challenges and adjusts expectations, the launch of Bitcoin and Ethereum ETFs in Hong Kong remains a significant development in the world of cryptocurrency investments.