Asia’s crypto mania is spurring a series of fund launches

Crypto mania among Asian investors is prompting asset managers in the region to seize opportunities to tempt them with their products despite tightening regulations, Cerulli Associates notes in a new report.

A number of cryptocurrency and blockchain-focused funds that invest in the broader universe without directly investing in cryptocurrency have been rolled out in the past year in Singapore, Hong Kong and Korea, while Australia has seen the region’s first exchange-traded fund with direct exposure to bitcoin and ether.

“For investors, the growing number of mutual funds and ETFs coming to market helps expand product choices or even legitimize crypto investing by providing arguably safer routes to access this asset class, compared to direct crypto investing,” said Ken Yap , Singapore-based. managing director for Asia at Cerulli.

“Crypto funds offer an important asset pooling opportunity for managers,” Yap added.

This article was previously published by Ignites Asia, a title owned by FT Group.

However, regional regulators have cracked down on the asset class, with the Monetary Authority of Singapore restricting retail access to crypto in August, and Thailand’s Securities and Exchange Commission overhauling advertising rules for digital asset companies.

South Korea also does not currently allow local players to use the services of cryptocurrency exchanges.

However, this environment of increasing regulatory scrutiny and market volatility will be “key selling points” for asset managers in offering crypto-related funds, rather than products that have direct exposure to the asset class, Yap said.

The increasing regulation has not stopped Asian executives from seeking opportunities in this area, with a number of Korean firms taking steps to expand their digital assets.

In January, Korea’s Mirae Asset Financial Group announced plans to roll out a digital asset business that would initially target custody services for cryptocurrency and non-fungible tokens and eventually create loans and funds linked to digital assets, the Korea Economic Daily reported, with reference to industry sources. . This push came amid growing demand for such services.

KB Asset Management, South Korea’s largest bank, announced in February that it had established a digital asset management preparatory committee to explore the development of digital assets and artificial intelligence funds.

KB AM rolled out the KB Global Digital Chain Economy fund, the first strategy in the country to focus on investments in blockchain technology companies, last September.

Generation Z and millennials fueled interest in crypto in South Korea, Cerulli said.

Singapore is also seeing strong interest among young investors, with Cerulli citing a survey from last year that found 51 percent of those aged 25 to 44 were more willing to invest in crypto, while only 36 percent of those aged 45 and over showed same interest.

At the start of the year, BNY Mellon Investment Management prepared to launch Singapore’s first retail-oriented fund investing in the blockchain universe, amid growing interest in crypto-assets and related technology among local investors.

Thailand and Vietnam have also emerged as hotbeds for retail cryptocurrency investment in Southeast Asia, even in the face of global market disruption and tightened regulations imposed on the highly volatile sector.

Thailand recorded $135.9 billion in crypto value transacted in the 12 months to June 2022, while Vietnam had $112.6 billion, according to a report published by blockchain data platform Chainalysis on September 21.

Crypto has also drawn interest from high-net-worth individuals, with Cerulli reporting that some private banks and family offices in both Singapore and Hong Kong are “seeing interest in direct crypto investment or crypto ETFs.”

There is demand from distributors too, with Cerulli’s survey indicating that they want asset managers to “develop niche product ideas that offer long-term opportunities, including technology themes such as blockchain and crypto”.

ETFs are seen as another way to give even more retail investors access to crypto. Australia has emerged as a regional leader in the crypto ETF space.

Australia’s first three cryptocurrency ETFs began trading in May. The Cosmos Purpose Bitcoin Access, 21Shares Bitcoin ETP and 21Shares Ethereum ETP ETFs went live on Australia’s alternative exchange, formerly known as Chi-X Australia, that month.

In June, the Hong Kong arm of South Korea’s Samsung Asset Management launched what it called the first global blockchain-related ETF in Asia. The Samsung Blockchain Technologies ETF is actively managed and may invest in blockchain-related ETFs, such as cryptocurrency futures ETFs listed in the United States.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignitesasia.com.

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