13 Apr

A trading frenzy is set off by the U.S. approval of spot Bitcoin ETFs, which prepares the ground for Asia's growing institutional interest.

As of January 10, 2024, the U.S. Applications for spot Bitcoin ETFs have been approved by the Securities and Exchange Commission (SEC) on several occasions. With $4.6 billion worth of shares exchanged on the first day, trading volume reached over $50 billion by February 22. In Asian markets where investment flows are already substantial and continuing to increase—particularly in institutional investing—the legalization of ETFs in the United States is anticipated to have a profound effect.

Observers, investors, and industry participants are wondering, "What's next? We can have a better idea of what to anticipate in markets like Hong Kong and other nations in the region by assessing what has transpired in the US and looking eastward.

Emphasis on Hong Kong

There is hope that a spot Bitcoin ETF will be approved in Hong Kong. They approved the first application in January from Harvest Fund Management, a significant asset fund in China. While there were expectations for clearance as early as Q1 2024, it wouldn't be shocking if it took until Q2 at the most. It usually takes weeks to months for the Securities and Futures Commission (SFC) in Hong Kong to approve standard ETFs.

A spot ETF approval is a long way off, although Hong Kong has already approved a few crypto ETF futures funds, such as the CSOP Bitcoin Futures, CSOP Ether Futures, and Samsung Bitcoin Futures.

Granting those approvals would seem to make sense overall. Hong Kong facilitates access to China's wealth and has developed a regulatory framework commensurate with the size of its asset and wealth management industry. Additionally, they might be more receptive to seeing Ethereum ETFs because Hong Kong currently provides Ethereum futures.

Applications for spot Ethereum ETFs have been received by the SEC, and while responses were permitted earlier, they must be responded to by May 23. This is in contrast to the U.S. 

Evaluating the Probability of Approval from Other Asian Nations

China, Thailand, and Singapore appear to be the only significant APAC nations where spot Bitcoin ETFs are not yet developed. Major Asian nations like Japan, South Korea, and Australia are probably going to follow the general course set by the United States and Hong Kong; even though it's still early, consumers are showing interest in these products. Because regulations vary slightly between nations, there will be variations in the processes involved in approving cryptocurrency products.

What Prevents More Crypto Businesses from Getting Regulatory Approved?

Two major issues that come up frequently when nations establish frameworks and regulations for cryptocurrency products globally are the necessity of anti-money laundering (AML) laws and counterterrorism funding (CTF). Given the serious threat of money laundering and the funding of terrorism in Asia, this may be especially crucial there.

For instance, exchanges seeking a cryptocurrency license must meet stringent regulations in Singapore and Hong Kong. Next, know your customer (KYC) protocols are scrupulously adhered to and transactions are closely observed. Errors can have expensive consequences because these are important financial hubs, including harm to the reputations of the companies that omit steps or otherwise deviate from the norm.

Due to worries about money laundering and the associated financing of North Korea's terrorism, all exchanges in South Korea that are registered and licensed are required to have a banking partner. In order to allay regulator concerns about transparent financial movements, banking information and KYC data are linked to the cryptocurrency exchange account when opening an account in that Asian nation. 

Concerns over market manipulation, which Gensler raised as a reason for postponing U.S. approval, must also be satisfactorily resolved in order for Asian regulators to approve a spot Bitcoin ETF. In order to instill confidence in regulators and investors and to enable cryptocurrency products get a larger share of the financial market, visibility is also crucial. These barriers and safeguards can soothe worries and provide the groundwork for future expansion. Furthermore, Asia and the rest of the world need to have strong, safe custody policies for cryptocurrency products. 

April 2024, Cryptoniteuae

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