Experts predict that the introduction of Bitcoin exchange-traded funds (ETFs) in Hong Kong could lead to significant growth, thanks to the use of a special in-kind creation model.

Senior Bloomberg analyst Eric Balchunas stated that Hong Kong's adoption of this in-kind creation model for spot Bitcoin ETFs might increase assets under management and trading volume in the region. This potential was highlighted in a research report by Bloomberg analyst Rebecca Sin, who saw this model as an opportunity for the market.

Sin explained that unlike the US, where transactions for Bitcoin ETFs are cash-only, Hong Kong's model involves Bitcoin being exchanged for ETF units. This difference could create opportunities in the market.

Earlier this year, Hong Kong authorities announced their readiness to accept applications for spot crypto ETFs, with plans to launch these products by mid-year. Several entities, including Harvest Hong Kong, have applied to launch spot Bitcoin ETFs.

The in-kind creation model in Hong Kong stands in contrast to the cash-creation model preferred by the US for spot Bitcoin ETFs. In Hong Kong, ETF issuers can exchange assets like Bitcoin with market makers instead of using cash for share creation and redemption. On the other hand, the US SEC's cash redemptions require selling Bitcoin to provide cash to redeeming shareholders. BlackRock, a Bitcoin ETF issuer, raised concerns about this method's challenges in aligning share prices with Bitcoin’s actual value.