By
Benjamin Njiri
April 23rd, 2024
The creation of a digital fund could help Hong Kong to source new streams of investment both domestically and overseas, so being proactive in this respect and taking steps to regulate the space could afford the region a competitive edge.
Cryptocurrencies have taken the financial market by storm in the last decade, with poster boy Bitcoin boasting a market capitalization of $117.8 billion during Q1 of 2020. However, the chequered history and unregulated nature of cryptocurrency have caused it to meet with opposition in various economies across the globe.
This selection of regions has historically included Hong Kong, with the country’s Securities and Futures Commission (SFC) having announced few crypto approvals since it began to formally regulate exchanges in October 2018.
Despite this, Venture Smart Asia’s recent application has been accepted, emerging as the first official crypto fund in Hong Kong in the process. But what does this mean for the markets, and could it influence Hong Kong’s recovery from COVID-19 in a positive manner?
Learning More about Hong Kong’s First Cryptocurrency
The acceptance of this application has also created the first Hong Kong fund that will allow individuals to invest in entirely digital assets, enabling many to take their first steps in the world of Bitcoin and similar tokens.
As we’ve already said, Venture Smart are the brains behind the fund, and they’ve set an ambitious target of having $100 million under management during the first year of trading.
This is more than achievable, however, particularly when you consider the demand for crypto tokens that currently exists through brokerage platforms such as Tickmill. Also, as the sole vehicle for crypto trading in Hong Kong, Venture Smart’s fund will establish the region as a South Asia hub with enhanced future prospects.
At its heart, this fund will focus largely on Bitcoin, which continues to dominate the crypto market despite its inherent volatility.
It will also serve as a simple tracker fund, which will enable participants to buy and sell bitcoin in high volumes (hence the $100 million trading target for the first 12 months of operation).
Beyond this, Venture Smart also plan to open a second actively managed fund later in 2020, with this likely to feature a more diverse basket of tokens including various stablecoins).
Why This Could be Good News for the Hong Kong Economy?
The timing of this approval could arguably not be better for Hong Kong, as the region continues to measure the socio-economic impact of the COVID-19 outbreak.
As the region has increased public spending and introduced quantitative easing measures as a way of negating the economic impact of the pandemic, the base interest rate has been slashed and the value of the Hong Kong dollar has plummeted. This is sure to have a short-term impact on capital inflows from overseas, impacting on company stock and share values over time.
However, the creation of a digital fund (and one that isn’t directly associated with fiat currencies or equities) could help Hong Kong to source new streams of investment both domestically and overseas, so being proactive in this respect and taking steps to regulate the space could afford the region a competitive edge over its contemporaries.
The introduction of the second or additional funds will also create more attractive options to investors, by offering access to a wider range of crypto tokens. Some of these are less volatile than others, while popular assets such as XRP and Ethereum also offer functional value in the form of payment platforms and iGaming solutions.
This will only help to reinforce the popularity of these funds and crypto trading in Hong Kong, providing a much needed financial and economic boost when the region needs it the most.