Crypto uptake in Hong Kong
Hong Kong has long been a global financial powerhouse.
This is unlikely to change anytime soon as the Hong Kong Securities and Futures Commission warmly embraces major cryptocurrency offerings.
The commission recently greenlighted the Solana spot exchange-traded fund (ETF) – the third cryptocurrency to be granted spot ETF status in China’s special administrative region.
The Solana ETF allows trading in Hong Kong dollars, yuan and US dollars.
The benefit of spot EFTs is that they can be traded on major stock exchanges via traditional brokerage institutions.
This means investors do not need to buy and store cryptocurrency directly.
Hong Kong is making its intentions for digital asset innovation clear.
Bitcoin and Ethereum spot ETFs are already listed on the Hong Kong Stock Exchange.
The adoption of the three spot ETFs, all issued by China Asset Management, indicates a strong appetite for regulation and greater investor access to major cryptocurrencies.
On-chain staking benefits
The approval of the Solana spot ETF by Hong Kong will buoy the Solana to USD rate.
The offering is attracting tremendous institutional interest due to its inclusion of staking features.
With staking, investors can bank cryptocurrency in a digital wallet, thereby helping a blockchain network validate transactions and create new blocks.
For the investor, the payoff is more cryptocurrency.
This is facilitated by a process called on-chain staking.
On-chain staking offers great transparency since the blockchain stores every transaction.
Another advantage is that staking data is not stored on a centralised database, removing the possibility of investors being banned.
The problem with off-chain staking, as it is known, is that even though it is cheaper, there is not nearly as much transparency.
Furthermore, most of the time it will be centralised which means bans can easily be put in place.
Turning back on futures
Spot ETFs are gaining traction in Hong Kong because they allow investors to bypass engaging with futures contracts and engage directly with cryptocurrencies.
Futures contracts are notoriously risky.
Not only is leverage not prioritised but investments are highly susceptible to interest rate risk.
Additionally, a lack of liquidity can hamstring investors even in cases where they feel it is the right time to trade.
There are also operational risks involved with futures.
Something as simple as an incorrect manual input can have a devastating outcome for investors.
Even though automation is making inroads in addressing such issues, they still occur.
The Solana spot ETF is therefore regarded as a far safer bet in Hong Kong’s burgeoning crypto market.
Solana’s all-rounder appeal
Solana, the world’s sixth-biggest crypto, is finding success in the East because word has quickly spread about its scalability, speed and low transaction fees.
It is considered a true all-rounder in that it can host gaming, Web3 social networks, financial services, decentralised applications (dApps), decentralised finance (DeFi) and Non-Fungible Token marketplaces.
For an economically-savvy trading node like Hong Kong, that is pure gold.
The city’s approval of its spot ETF is confirmation that it is now viewed as a long-term investment asset.
Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent and the world.
Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to editorial@techtrendsmedia.co.ke
