Key Points
- Hong Kong is set to introduce its first Bitcoin inverse investment product on July 23.
- The product, offered by CSOP Asset Management, aims to return profits based on Bitcoin price drops.
Hong Kong is preparing to roll out its inaugural Bitcoin inverse investment product on the city’s stock exchange. This product, a Bitcoin Futures Daily Inverse Product, is set to launch on July 23. It is a product of CSOP Asset Management and is designed to yield returns when Bitcoin’s price falls.
The Hong Kong Exchanges and Clearing (HKEX) has already announced the regulatory approval of this product. This move underscores the city’s dedication to broadening its cryptocurrency-related offerings.
Understanding Inverse Products
Inverse products, such as the one being launched, are structured like exchange-traded funds (ETFs). However, they are engineered to achieve short-term investment results. These products are often sought after by professional, trade-focused investors who aim to profit from cryptocurrency price fluctuations.
Unlike traditional investment products such as spot ETFs, this inverse product does not invest directly in Bitcoin. Instead, it takes short positions in Bitcoin futures traded on the Chicago Mercantile Exchange (CME), with the goal of profiting from BTC price declines.
CSOP has issued a warning to investors about the extreme volatility associated with these products. It cautioned that values could plummet by more than 20% in a single day, potentially wiping out investments.
Brian Roberts, the head of exchange-traded products at HKEX, had previously stated that the exchange was receptive to listing leveraged and inverse crypto products.
Hong Kong’s Crypto Ambitions
The addition of a CSOP financial product to Hong Kong’s stock exchange is part of the city’s ongoing efforts to diversify its financial products and establish itself as 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 and has granted preliminary approval to 11 companies. However, 13 exchanges, including HKX, have withdrawn their applications due to difficulties in meeting stringent regulatory requirements.
Earlier in July, Christopher Hui, Secretary for Financial Services and the Treasury Bureau (FSTB), stated that regulators are reviewing the laws. He mentioned that the Hong Kong Monetary Authority (HKMA) and the SFC would monitor market developments and review the requirements on virtual asset (VA)-related activities as needed.
The HKMA is also focusing on the regulation of stablecoins. On July 17, the FSTB, in collaboration with the HKMA, released the results of a two-month-long public consultation on stablecoin regulations.
