The listing of a CSOP’s financial product is an addition to Hong Kong’s ongoing efforts to diversify its financial products and become a central hub for crypto business.
Hong Kong is launching its first Bitcoin inverse investment product on the city’s stock exchange on July 23. This new Bitcoin Futures Daily Inverse Product, offered by CSOP Asset Management, provides returns based on drops in the price of Bitcoin.
The Hong Kong Exchanges and Clearing (HKEX) recently announced the product’s regulatory approval, highlighting the city’s commitment to expanding its crypto-related offerings.
What Are Inverse Products?
Inverse products, such as the one being introduced, are structured as exchange-traded funds (ETFs). However, they are designed to achieve short-term investment results. Professional, trade-oriented investors seeking to profit from the fluctuations in cryptocurrency prices, often invest in such products.
Unlike traditional investment products like spot ETFs, this inverse product will not invest directly in bitcoin. Instead, it will take short positions in bitcoin futures traded on the Chicago Mercantile Exchange (CME), aiming to profit from BTC price declines.
Notably, CSOP warned investors about the extreme volatility associated with these products. It stated that values could drop by more than 20% in a single day, which could potentially wipe out investments.
Brian Roberts, head of exchange-traded products at HKEX, had earlier indicated that the exchange was open to listing leveraged and inverse crypto products.
Hong Kong’s Ambitions
The listing of a CSOP’s financial product is an addition to Hong Kong’s ongoing efforts to diversify its financial products and become a central hub for crypto business. This launch comes just three months after the city approved the launch of six bitcoin and ether-based ETFs.
Hong Kong has also been actively working on regulating the crypto sector. The Securities and Futures Commission (SFC) has developed a licensing regime for centralized cryptocurrency exchanges. So far, preliminary approval has been granted to 11 companies. On the other hand, 13 exchanges, including HKX, have withdrawn their applications due to difficulties in meeting the stringent regulatory requirements.
Earlier in July, Christopher Hui, Secretary for Financial Services and the Treasury Bureau (FSTB), stated that the regulators are reviewing the laws. He stated that the Hong Kong Monetary Authority (HKMA) and the SFC would “keep in view market developments and review the requirements on virtual asset (VA)-related activities as appropriate”.
The HKMA is also focusing on the regulation of stablecoins. On July 17, the FSTB, along with the HKMA, released the results of a two-month-long public consultation on stablecoin regulations.
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