Blockstream CEO Adam Back Highlights Unique Aspects of Hong Kong's Bitcoin, Ethereum ETFs

Adam Back, CEO of Blockstream, recently detailed the unique characteristics of Hong Kong's newly launched Bitcoin and Ethereum ETFs on X, emphasizing their in-kind redemption model, which sets them apart from their U.S. counterparts.

The Significance of In-Kind Redemption

After several weeks of anticipation, Hong Kong's spot Bitcoin and Ethereum ETFs went online today, signaling a watershed moment for the cryptocurrency sector, as per Coingape.

According to the Blockstream CEO, one of the distinguishing features of these ETFs is their in-kind redemption approach. This approach represents a significant divergence from the typical cash-only transactions witnessed in the US ETF market.

Hong Kong's preference for in-kind developments provides a distinct approach, potentially diversifying investment techniques, and is likely to attract a more crypto-focused investor base.

This approach allows investors to redeem their ETFs in Bitcoin or cash, unlike the US "cash-create" model, which only accepts cash. Back describes the true form of a BTC-backed ETF as "another timezone and market to get a bit closer to the 24×7 spot market."

Remember that the Securities and Exchange Commission (SEC) requires US-approved spot Bitcoin ETF issuers to use a cash-create method for their products. This compelled investment management businesses such as BlackRock and WisdomTree to revise their filings to reflect the cash-only approach, leaving in-kind creations for a later date.

It is worth mentioning that many of the candidates for spot Bitcoin ETFs in the United States were interested in incorporating an in-kind redemption approach for their funds. However, they were forced to reconsider their position on the subject. At the time, it was a plan for the applicants to coordinate themselves in preparation for SEC approval, which occurred earlier this year.

Comparative Analysis: Hong Kong vs. U.S. ETF Models

Hong Kong's transition towards in-kind creation is expected to boost Asset Under Management (AUM) levels while increasing liquidity and trading volumes.

With only a few hours left on its inaugural trading day, the Hong Kong spot Bitcoin and Ethereum ETFs had a trading volume of $12 million, 383 times lower than what the US experienced on Day 1.

In the US market, trading volumes totaled $4.6 billion on the first day. Trading volume is projected to increase as acceptance develops, with more Chinese investors entering the market.

Photo: Microsoft Bing

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