Hong Kong to get first bitcoin inverse investment product, adding to crypto ETFs
Hong Kong's first bitcoin inverse investment product, which offers returns based on declines in the price of the world's largest cryptocurrency token, debuts on the city's stock exchange on Tuesday, as the Asian financial hub continues to expand its virtual asset product offerings to draw investors.
The exchange's move to list CSOP Asset Management's new Bitcoin Futures Daily Inverse Product, the first of its kind in Hong Kong, reflects the city's ongoing efforts to diversify its offerings of cryptocurrency-related financial products and to become a centre for such business. Hong Kong Exchanges and Clearing (HKEX) announced approval of the product in a statement last week.
The offering comes three months after the city approved the launch of six exchange-traded funds (ETFs) that invest directly into bitcoin and ether, the world's two largest cryptocurrency tokens. The Hong Kong stock exchange was open to listing leveraged and inverse crypto products, HKEX's head of exchange-traded products Brian Roberts told Bloomberg in April.
Inverse products are structured as ETFs but seek short-term investment results and target professional, trade-oriented investors.
Instead of investing directly in bitcoin, CSOP's new product, denominated in US dollars, invests primarily in short positions of bitcoin futures traded on the Chicago Mercantile Exchange, the company said in regulatory filings last week. The strategy aims to allow traders to profit from declines in market prices.
These products face extreme price volatility that could wipe out investments, CSOP warned, and values may drop by more than 20 per cent in a single day.
Hong Kong has charged forward with initiatives aimed at boosting its virtual asset sector, part of the city's broader efforts to maintain its financial hub status that has taken a blow in recent years.
The city was the first major financial market to launch spot ether ETFs, months ahead of the US. The Securities and Futures Commission last year established a licensing regime for centralised cryptocurrency exchanges, with preliminary approval so far given to 11 companies. The Hong Kong Monetary Authority is now moving to regulate stablecoins, or crypto tokens that peg their value to other assets, typically fiat currencies such as the Hong Kong dollar and US dollar.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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