As the cryptocurrency market faces significant headwinds, the launch of six crypto exchange-traded funds (ETFs) in Hong Kong has not generated the anticipated investor interest. A recent survey by Desmond Yong at a blockchain conference in Taiwan revealed that none of the 100 attendees had invested in these ETFs, despite the considerable hype surrounding their launch. Yong, who previously worked with the Monetary Authority of Singapore and is now the legal and compliance director at ChainUp.

Since their debut in late April, all six ETFs have reported negative returns as of August's end, raising concerns about their viability in a volatile market.

Source: LSEG, Nikkei Asia

The poor performance is attributed to the recent volatility in digital currencies, as well as concerns over the policy direction of the U.S. regarding virtual assets after the November presidential election.

"Investor appetite for the new ETFs appears more muted," Stephanie Leung, chief investment officer at fund management platform StashAway, told Nikkei Asia. "Two key reasons for this stand out: first, concerns about crypto's high volatility, especially after its big gains earlier this year; and second, artificial intelligence stocks... have continued to dominate investor attention."

The regulatory environment in Asia also poses challenges for crypto ETFs. While Hong Kong has embraced such funds, other major financial hubs like Singapore have been more cautious. The Monetary Authority of Singapore (MAS) has not approved ETFs tracking Bitcoin, Ether, or other digital payment tokens for retail investors.

"ETFs of Bitcoin, Ether and other digital payment tokens (DPTs) are not approved by MAS for offer to retail investors," an MAS spokesperson told Nikkei Asia. "DPTs are not permitted investments for retail collective investment schemes.

Despite the current headwinds, some industry players remain optimistic about the future of crypto ETFs in Asia. Vivien Wong, partner at HashKey Capital, which backed the listing of crypto ETFs in Hong Kong, said the firm is engaged in "discussions with the regulators about new offerings" and expects markets to open up to crypto-linked products like ETFs down the road.

However, for now, the crypto ETFs launched in Hong Kong earlier this year are struggling to gain traction, as investors remain cautious about the high volatility and regulatory uncertainty surrounding the asset class. The lukewarm reception of cryptocurrency ETFs reflects a cautious market environment, where many potential investors remain skeptical. As Hong Kong recently launched its first spot Bitcoin and Ether ETFs, the initial trading volumes were modest compared to the excitement generated in other markets, particularly the United States. This scenario raises questions about the future demand for such products in Asia, especially as regulatory landscapes evolve and investor sentiment gradually shifts. Yong's observations serve as a reminder that while the potential for growth in the crypto ETF market exists, it may take time for broader acceptance and understanding among investors to materialize.

Read more on Nikkei Asia.