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Banking & finance
OpinionHong Kong Opinion
Danny Chong
Danny Chong

Opinion | How crypto can help restore Hong Kong’s financial glory

  • As more financial regulators embrace fintech, Hong Kong is playing a pioneering role in launching digital asset exchange-traded funds
  • The city’s reasonable approach to regulation and innovation can attract more foreign investment and also solve talent shortages

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Illustrative bitcoin and ether tokens are held up during the listing ceremony of exchange-traded funds investing directly in cryptocurrency, at the Hong Kong Stock Exchange on April 30. Photo: Bloomberg
Danny Chong
In recent years, Hong Kong’s status as a financial centre has suffered due to the stringent controls during the Covid-19 pandemic and pressure from mainland China, causing many businesses to relocate to places like Singapore. However, Hong Kong is now poised for a financial resurgence, with a focus on cryptocurrency – a digital form of currency that operates independently of a central bank.
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Once viewed as a niche for tech enthusiasts, cryptocurrency has now proven to be a transformative technology with the potential to reshape financial systems worldwide. Recognising this potential, Hong Kong has taken significant steps to position itself as a leading cryptocurrency hub, showing promise of restoring the city’s status as Asia’s foremost financial centre. This is especially relevant following the US Securities and Exchange Commission’s preliminary approval for ether exchange-traded funds (ETFs), which highlights not only the growing regulatory acceptance of cryptocurrency assets but also Hong Kong’s pioneering role in the trend.
Hong Kong is setting a strong precedent for cryptocurrency innovation in Asia. It recently became the first in Asia to launch digital asset ETFs, which are mainstream investment vehicles that track the prices of cryptocurrencies. Hong Kong’s ETFs invest in bitcoin and ether, the world’s two largest cryptocurrency tokens.

For those unfamiliar with cryptocurrency, this is a major milestone in Asia and across the world as it opens the road for adoption and investment in cryptocurrency, moving the asset class from niche to mainstream. Although the US allowed spot bitcoin ETFs in January, it only recently approved applications to list spot ether ETFs; a second round of approvals will be needed before the products can begin trading. The US’ decision on ether ETFs came a month after Hong Kong became one of the first in the world to approve them.

Hong Kong’s first-mover advantage could attract a new wave of fintech activity and talent to the region, leveraging its forward-thinking regulatory framework. These steps have promoted the city as a global digital asset hub.

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Hong Kong already has plans to maintain its advantage over the US by looking at strategic ways to keep developing as a cryptocurrency hub. It could do this by approving advanced financial products before the US does. For example, Hong Kong could allow yield-earning options such as ether ETF staking.

Prices of cryptocurrencies against the US dollar are displayed on a screen in Hong Kong on February 29. Photo: Bloomberg
Prices of cryptocurrencies against the US dollar are displayed on a screen in Hong Kong on February 29. Photo: Bloomberg
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