UBS Embarks on Crypto ETF Trading Frontier in Hong Kong

• Investment firm UBS Group is set to initiate spot ETF futures trading in Hong Kong.
• The spot ETF futures trading service will be accessible to a limited group of regional users.
• The service will allow investors to access crypto assets without direct ownership.

The cryptocurrency industry has witnessed a surge in the demand for Exchange-Traded Funds ( ETFs ) throughout the year, offering investors diverse pathways to explore crypto assets. Despite this proliferation, the industry faces a formidable challenge in the form of intensified global regulations as the green light for such as the heavily anticipated Bitcoin Spot ETF, as BlackRock, Grayscale, and others await the nod from the SEC.

While the industry awaits the approval of the Bitcoin ETF, cryptocurrencies are gradually being etched into mainstream investment portfolios as entities seek to leverage the growing momentum. Not to be left behind, investment bank UBS Group has entered the aspiring crypto hub Hong Kong with an expanded line of crypto-linked ETFs.

UBS Group Rolls Out Three Crypto ETFs for Select Users

On November 9th, Bloomberg reported that UBS Group AG will commence offering crypto-linked exchange-traded funds to investors in Hong Kong.

Having secured authorization from the Hong Kong Securities and Futures Commission(SFC), the company will offer investment and trading services for three crypto ETFs, including Samsung Bitcoin Futures Active, CSOP Bitcoin Futures, and CSOP Ether Futures ETFs.

The ETFs will be available in limited quantities to the bank’s premier clients on its Hong Kong platform starting Friday, November 10th, 2023.

In addition to providing access to investment opportunities, UBS will offer investors educational resources to enhance their understanding of the listed ETFs, their features, and associated risks.

UBS’ ETFs and Their Features

The Samsung Bitcoin Futures Active ETF (Stock Code 3135.HK), launched in January 2023, operates a sub-fund under Samsung ETFs Trust III. It provides investors economic exposure to Bitcoin’s value by investing predominantly in front-month Chicago Mercantile Exchange (“CME”) Bitcoin Futures contracts without directly investing in the asset itself. Denominated in HKD, the Samsung Bitcoin Futures Active widens investment opportunities while paving the way for future crypto-technology adoption.

UBS’s CSOP Bitcoin Futures (HKD Counter Stock Code: 3066) is Hong Kong’s inaugural Bitcoin futures ETF, offering investors capital appreciation through an actively managed exposure to CME Bitcoin Futures.

Launched on December 16th, 2022, it faces susceptibility to adverse economic, political, and regulatory policies affecting Bitcoin, the CME, or the CME Bitcoin Futures market. It is denominated in HKD, with unit prices driven by market factors such as supply and demand.

Similarly, the CSOP Ether Futures ETFs (HKD Counter Stock Code: 3068) is an actively managed exchange-traded fund that targets long-term capital growth by investing in CME Ether Futures whose price movement may deviate significantly from the spot price of ether. 

Investors must weigh key risks associated with the Ether Futures and the sub-fund investments, including potentially large roll costs, operational and margin risks, and mandatory measures imposed by relevant parties.

On the Flipside

• Although cryptocurrency-linked ETFs only provide streamlined access to digital assets, they are highly susceptible to market volatility and price fluctuations.
• The international regulatory scrutiny of the cryptocurrency industry from financial regulators could influence the success of these exchange-traded funds.
• Hong Kong is taking proactive steps towards providing access to wider investment opportunities .

Why This Matters

Incorporating crypto-linked ETFs into UBS Group’s offerings highlights the interest of traditional financial institutions in crypto ETFs. It reflects their acknowledgment of the demand and anticipation for the Spot Bitcoin ETF and their efforts to position themselves as vendors before they go live.

BlackRock gears for a spot Ethereum ETH approval as it files for an iShares Trust registration in Delaware. Read more: 
BlackRock Eyes Spot Ethereum ETF – ETH Price Soars Past $2K  

Find out more about the growing speculations of a spot Bitcoin ETF approval by the SEC and its price impact:
Bitcoin Nears $37K Amid Spot ETF Approval Buzz