On March 14, with Bitcoin trading at around $73,115, Gary Tiu, Executive Director & Head of Regulatory Affairs at OSL Group, provided an in-depth analysis of the evolving landscape of spot Bitcoin ETFs in Hong Kong during his appearance on Bloomberg TV’s “The China Show.”

His discussion with Yvonne Man and Annabelle Droulers shed light on the anticipation surrounding the introduction of these ETFs, the intricacies of the supporting infrastructure, and the broader implications for the digital asset market in Hong Kong.

OSL Group, previously known as BC Technology Group, has established its presence in the digital asset market, providing a range of services aimed at institutions, professional, and retail investors. The company prides itself on its compliance with regulatory standards and its experience in the sector. As an entity that operates a digital asset platform licensed by the SFC, OSL Group has embedded compliance and security within its operational framework. The services offered by OSL Group extend to brokerage, custody, exchange, and SaaS.

Spot Bitcoin ETFs in Hong Kong: A Closer Look

Tiu expressed optimism about the potential launch of spot Bitcoin ETFs in Hong Kong in the coming months. Highlighting the significant investor interest sparked by similar developments in the U.S., he detailed the extensive efforts required to transition from ETF conception to its first trade. This process involves a collaborative effort among various financial institutions, including the stock exchange, regulated asset managers, licensed brokers (known as authorized participants in the U.S. and participating dealers in Hong Kong), depository services, and asset custodians for both cash and crypto.

He emphasized the importance of having high-quality market makers to ensure the smooth trading of these products on the exchange. The Hong Kong framework is expected to heavily rely on locally licensed companies, contributing to a robust and diverse ecosystem capable of mitigating concentration risks.

Operational Differences and Fee Structures

Tiu also discussed the operational differences between the U.S. and Hong Kong models, particularly the ability for Hong Kong products to directly receive Bitcoin from subscribers and payout in crypto assets during redemptions. This feature could give Hong Kong ETFs a competitive edge by lowering execution costs. Regarding fees, while the U.S. has set a low benchmark, Hong Kong players will need to compete on similar levels. He also noted the higher insurance requirements in Hong Kong, offering greater protection against cybersecurity risks.

Expectations for Demand and the Future of ETFs

When asked about demand, Tiu indicated that successful ETFs require properly incentivized market makers for competitive pricing and liquidity. He anticipates that the comprehensive support from issuers and the ecosystem in Hong Kong will make these products attractive to investors. Furthermore, he sees the ability of funds to directly absorb BTC from market makers and subscribers as a positive indicator for the success of spot Bitcoin ETFs in Hong Kong.

OSL Group’s Strategic Focus

Tiu shared insights into OSL Group’s preparation for the evolving market, including their focus on both institutional and retail platforms. He revealed plans for significant investments in new technology and mergers & acquisitions to enhance their services. Tiu mentioned that the launch timeline for a retail platform is dependent on delivering a high-quality product that meets the expectations of retail investors, emphasizing user experience.

The segment ended with Tiu touching on the broader crypto market, including Ethereum, noting the global race to launch the first Ethereum ETF. The competition for market timing and the urgency to be the first mover in this space underscore significant attention to spot Ethereum ETFs alongside Bitcoin.

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