Huaxia Fund (Hong Kong), Bosch Fund (International), and Harvest International's Bitcoin ETF and Ether ETF were approved in Hong Kong today. They are scheduled to be issued on April 29 and listed on the Hong Kong Stock Exchange on April 30.

The first batch of Bitcoin spot ETFs was approved by the Hong Kong Securities Regulatory Commission

The rates for the above three products were also disclosed at the same time. Among them, products owned by Harvest International charge a 0.3% management fee, and management fees are reduced within 6 months; products owned by Bosch Fund (International) charge 0.6% management fees, and management fees are reduced within 4 months after issuance; and products owned by Huaxia Fund (Hong Kong) are charged 0.99% management fees.

According to reports, the first batch of Bitcoin spot ETFs and Ether spot ETFs introduced a coin holding subscription mechanism (that is, investors are allowed to directly use Bitcoin and Ether to subscribe for corresponding ETF shares). According to industry insiders, as the first batch of ETFs in Asia that can be purchased directly using corresponding cryptocurrencies, the launch of these products provides a new asset class investment method, which not only lowers the entry threshold, but also enhances investment flexibility and market transparency by providing physical subscription and redemption options. It is expected to further promote the development of the virtual asset market in Hong Kong and Asia as a whole and attract more global capital inflows.

Bosch Fund (International) Limited said that this historic approval not only provides new investment options for Asian investors, but also marks a solid step in Hong Kong's path to establishing an international virtual asset finance center.

In an interview with the Securities Times reporter, some market sources said that the approval of a Bitcoin spot ETF means that investors can purchase virtual asset-based financial products through securities accounts, lowering the transaction threshold; at the same time, it also means that virtual assets are officially accepted by mainstream financial markets, moving from the niche to the public in the true sense of the word.

Hedy, chief researcher at Eurotech Cloud Chain Research Institute, said in an interview with the Securities Times that Hong Kong people are particularly enthusiastic about Bitcoin. As of January of this year, there are at least 200 physical crypto OTC exchange shops (exchange shops) in the Hong Kong virtual asset market. According to estimates, the average annual transaction volume is over 10 billion US dollars. Before there was an ETF channel, Chainalysis also estimated the Hong Kong market: although Hong Kong's population was much smaller than the US, Hong Kong's active OTC cryptocurrency market boosted $64 billion in trading volume under the previous bear market (June 2022 to June 2023). Compared to the rest of Asia, Hong Kong dominates large institutional cryptocurrency transactions. Of the annual virtual asset transactions in Hong Kong, 46.8% are institutional transactions of more than 10 million US dollars, which is higher than the global average for transactions of the same type.

Hong Kong continues to promote industry participation in the construction of the Web3 ecosystem

Under the ever-rising virtual asset development ecosystem, Huobi's global website shows that the price of Bitcoin has increased by 200% in the past year, and the increasing scale of assets has also made the transaction and management value of this asset receive more and more attention. The listing of Bitcoin spot ETF marks a new stage in the entry of virtual assets into the traditional financial market, and also provides investors and financial institutions with more ways to participate in the digital asset market.

In fact, as early as December 16, 2022, the Hong Kong Stock Exchange listed two virtual asset futures ETFs — Southern East East England Bitcoin Futures ETF (stock code: 3066) and Southern East Ether Futures ETF (stock code: 3068), which track standardized, cash-settled Bitcoin futures contracts and Ether futures contracts traded on the Chicago Mercantile Exchange (CME). In January 2023, a third virtual asset ETF was listed in the Hong Kong market, bringing a total of two Bitcoin futures ETFs and one Ether futures ETF on the market.

The Hong Kong Stock Exchange became the first exchange in Asia to provide cryptocurrency ETF products, providing Asian investors with the opportunity to participate in virtual asset investments. The launch of the first batch of virtual asset ETFs is also an important milestone in Hong Kong's virtual asset ecosystem, meaning that global investors can enter the virtual asset world in a regulated environment for the first time in the Asian time zone.

Bitcoin spot ETFs are about to land in the Hong Kong market, and how to properly regulate virtual assets has also become a core concern in the industry. The Hong Kong Securities Regulatory Commission is also continuously optimizing its regulatory policies. On December 22, 2023, the Hong Kong Securities Regulatory Commission issued the “Joint Circular Concerning the Virtual Asset Related Activities of Intermediaries” and the “Circular Concerning Funds Approved by the Securities Regulatory Commission to Invest in Virtual Assets”. Among them, the previous circular clarified the risks of tokenizing securities and intermediary activities that intermediaries are subject to supervision, including management, distribution, trading, consulting, etc.

The latter circular stated that the regulator is ready to accept approval applications for other funds involving virtual assets, including virtual asset spot ETFs, and also stipulates the rules to be applied by intermediaries when distributing virtual asset-related products and the standards of conduct to be met when distributing approved funds.

In addition, the Hong Kong Securities Regulatory Commission has published several lists of virtual asset trading platforms to ensure that information about virtual asset trading platforms is published in a clear, transparent and timely manner. Among them, the “List of Licensed Virtual Asset Trading Platforms” lists the names of virtual asset trading platform operators officially licensed by the Securities Regulatory Commission. Currently, only two cryptographic platforms have been approved by the Hong Kong Securities Regulatory Commission — OSL Digital Securities Limited and Hash Blockchain Limited.

At the “2024 Hong Kong Web3 Carnival” held in Hong Kong on April 6, some Hong Kong regulators publicly stated that they will continue to promote more industry participation and promote the steady and responsible development of the virtual market through multi-pronged methods such as timely distribution of information and comprehensive public education. He said that at present, more than 220 Web3.0-related companies from more than 20 regions, including the Mainland, Europe and the US, have set up offices in Hong Kong, including virtual asset exchanges, blockchain infrastructure companies, blockchain cybersecurity companies, virtual currency wallets and payment companies. In particular, in the field of virtual assets, a comprehensive and clear regulatory system is the key to promoting its sustainable development.

Hedy said that Hong Kong's layout of Web3 and opening up ETF channels that are more well-known to the public is more profound. This is not only a favorable adjustment to the balance sheets of financial institutions due to the “shrinking” of overall assets, but also a strategic strategy to stay at the “table” or even form a leading player in organizing a new financial table. Along with fundamental benefits such as Bitcoin halving, the virtual asset spot ETF approved by Hong Kong this time has unlimited potential in the future.

Editor/Somer