Hong Kong’s foray into the digital asset ETF market faces challenges, as conventional banks train warning amid regulatory considerations and expertise shortages. Over a month because the itemizing of Hong Kong’s digital asset spot ETF, banks have but to take part in distribution.
Chris Barford, Head of Monetary Companies Consulting at Ernst & Younger Hong Kong, attributed the hesitation amongst conventional banks to considerations over anti-money laundering (AML) and know-your-customer (KYC) laws. Moreover, an absence of technical experience additional deters their participation in product distribution.
Whereas mainstream brokerages have distributed digital asset spot ETFs, banks function beneath completely different regulatory entities, requiring permissions and inside assessments for compliance. Barford emphasised the significance for conventional monetary establishments to make sure regulatory adherence, notably in AML and KYC protocols.
Regardless of regulatory hurdles, institutional buyers are more and more eager about digital belongings, anticipating potential returns outweighing market volatility. An Ernst & Younger survey revealed plans amongst institutional buyers to extend allocations to digital belongings within the subsequent 2 to three years, with expectations to speculate about 1% of belongings if belongings beneath administration exceed $500 billion.
Nonetheless, regardless of banks’ cautious strategy, the buying and selling quantity of digital asset ETFs in Hong Kong stays comparatively low. Notably, the China Bitcoin ETF recorded a mean day by day transaction quantity of 1,557 from its itemizing in April, considerably decrease than its counterparts in the US.
Barford acknowledged the soundness of regulatory route within the Hong Kong market, attributing its attractiveness to buyers to the rigorous regulatory opinions and approvals. Regardless of the decrease buying and selling volumes, Hong Kong presents a safe funding setting, reassuring retail buyers towards fraud or cybersecurity dangers.
As consideration gravitates towards digital asset investments, conventional monetary establishments the applying of important applied sciences in cost, settlement, and custody. Tokenization emerges as a focus, with establishments like HSBC venturing into tokenizing belongings like gold for retail buyers in Hong Kong. Barford envisions broader tokenization functions, probably extending to actual property investments, making asset possession extra accessible to a broader investor base.
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