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If SEC Rejects Spot ETFs, These Countries Could Step Up To Meet Demand

Last Updated November 6, 2023 11:38 AM
James Morales
Last Updated November 6, 2023 11:38 AM

Key Takeaways

  • Globally, the market for spot Bitcoin ETFs is worth $4.16B.
  • Such funds are currently listed on exchanges in 8 countries, including Canada and Germany.
  • Hong Kong’s financial regulator is open to allowing ETFs to hold cryptocurrency directly.
  • Which new ETF may follow BTC’s?

In the United States, the recent actions of asset managers that have applied to list spot Bitcoin Exchange Traded Funds (ETFs) point to growing confidence that the Securities and Exchange Commission (SEC) will approve the funds soon.

Yet, despite the industry’s general consensus that US spot bitcoin ETFs could hit the market any day now, there can be no certainties until the SEC makes an official announcement. Should the agency buck expectations and continue to resist spot crypto funds, investors could always turn to offshore options as an alternative. 

Spot Bitcoin ETF Market Worth $4.16B Globally

While US-based ETFs have so far been prohibited from holding Bitcoin directly, spot crypto funds are already available in 8 offshore markets.

According to a recent report  by CoinGecko, 20 spot Bitcoin ETFs in Australia, Brazil, Canada, the Carman Islands, Germany, Guernsey, Jersey and Liechtenstein already hold assets worth $4.16B.

spot bitcoin ETFs global market
  Canadian funds account for nearly half of the global market for spot Bitcoin ETFs.

At present, Canadian funds have attracted the most investment, with seven ETFs holding assets worth $2B, accounting for 48.2% of the global market. In second place, Germany’s only spot Bitcoin fund, the ETC Group Physical Bitcoin ETF (BTCE ) currently holds over 23,400 BTC worth around $820M

Looking forward, Hong Kong could soon open the door to spot crypto funds, and the territory may even overtake the US, where the SEC appears to be intent on blocking spot Bitcoin ETFs from coming to market for as long as it can. 

Hong Kong Regulator Open to Spot Crypto ETFs

in a recent interview , the Hong Kong Securities and Futures Commission (SFC) CEO, Julia Leung, implied that the regulator was open to allowing ETFs to hold cryptocurrencies directly.

“We welcome proposals using innovative technology that boosts efficiency and customer experience,” Leung remarked. She said the SFC would be happy to give spot crypto ETFs a chance “as long as new risks are addressed.”

Judging from its previous record, if Hong Kong embraces spot Bitcoin funds, the Asian crypto hub could leapfrog the US by allowing ETFs to hold other cryptocurrencies too.

Futures-based crypto ETFs are already trading on the Hong Kong Stock Exchange, just as they are in the US. In fact, ETH-tracking funds were available to investors in Hong Kong nearly a full year before they made an underwhelming debut in the US. 

After Bitcoin, Spot Ether Funds Could Follow Shortly

In contrast with the US, where the first Ethereum futures ETFs were approved more than 2 years after ProShares’ Bitcoin Strategy ETF (BITO ) initially hit the market, when Hong Kong embraced crypto futures ETFs, both BTC and ETH-based funds were approved simultaneously. 

Suggesting that the SFC would treat spot funds similarly, Leung observed that “our approach is consistent regardless of the asset.”

Although the SEC has yet to approve a single spot Bitcoin ETF, asset managers are already preparing their next move.

In September, the first application to launch a spot Ether ETF in the US was filed  by Ark Invest and 21Shares. Other asset managers will likely join if the SEC approves spot Bitcoin funds.

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