Referred to as a "major moment in Hong Kong's financial history"! Spot Bitcoin and Ethereum ETFs have been approved, and everyone is concerned about how to invest?

Author: Shen Shuhong, Caixin News

Caixin News reporters learned that today, the first batch of Bitcoin and Ethereum spot ETF products applied for by the Hong Kong subsidiaries of Huaxia Fund, Bosera Fund, and Harvest Fund have been officially approved by the Hong Kong Securities and Futures Commission (SFC), and are expected to be officially listed for trading at the end of April.

This historic approval not only provides Asian investors with a new investment option but also marks a solid step forward for Hong Kong in establishing itself as an international virtual asset financial center, making it significant for Hong Kong to take the lead in the virtual currency financial center.

The fee rates for the three products have also been disclosed. Among them, the product under Harvest International charges a management fee rate of 0.3%, with a waiver of management fees for holdings within six months; the product under Bosera Fund (International) charges a management fee of 0.6%, with a waiver of management fees for the first four months after issuance; while the product under Huaxia Fund (Hong Kong) charges a management fee of 0.99%.

According to relevant analysts, competition for Bitcoin ETFs may be fierce, as issuers show differentiation in fees, issuance, and stock codes. "Each ETF's market maker and virtual asset platform are also different, which may bring slight advantages at launch. Fees may also vary, so investors need to pay attention to the total ownership cost of each ETF."

As the news broke, many investors are concerned about how to invest. Preliminary interviews with reporters revealed that the aforementioned products can be subscribed to in cash or with cryptocurrency, but relevant accounts need to be opened in Hong Kong to proceed. There is currently no clear arrangement for inclusion in the Hong Kong Stock Connect.

Above is the investment advice from Bosera International

Above is the investment advice from Huaxia Fund (Hong Kong)

Above is the investment advice from Harvest International

6 Spot Virtual Asset ETFs Approved

Huaxia Fund (Hong Kong) announced today that the Huaxia Bitcoin ETF and Huaxia Ethereum ETF have been approved by the Hong Kong Securities and Futures Commission (SFC), with plans to issue on April 29, 2024 (next Monday) and list on the Hong Kong Stock Exchange on April 30.

On the same day, the two virtual asset spot ETFs jointly applied for by Bosera Fund (International) Limited (hereinafter referred to as "Bosera International") and HashKey Capital Limited (hereinafter referred to as "HashKey Capital"), as well as the Harvest Bitcoin Spot ETF and Harvest Ethereum Spot ETF applied for by Harvest International Asset Management Limited (hereinafter referred to as "Harvest International"), have been officially approved by the Hong Kong Securities and Futures Commission, and are expected to be officially listed for trading at the end of April.

This is the first time such products have been launched in the Asian market, aimed at providing investment returns closely tied to the spot prices of Bitcoin and Ethereum (before fees and expenses).

Regarding the approval of these products, Han Tongli, CEO and Chief Investment Officer of Harvest International, believes that this not only reflects Hong Kong's institutional advantages as an international financial center but also demonstrates the region's foresight in financial technology innovation.

Harvest International stated that this not only marks the launch of the first Bitcoin and Ethereum spot ETFs in Asia but also represents an innovative realization of the redemption model based on Bitcoin and Ethereum, providing global investors with a new investment avenue that is compliant, transparent, and efficient, opening a new chapter in the integration of digital assets with the traditional financial system.

Bosera International pointed out that the issuance of virtual asset spot ETFs not only provides investors with new asset allocation options but will also further consolidate Hong Kong's position as an international financial center and virtual asset hub. "This demonstrates Hong Kong's open attitude and innovative spirit towards emerging financial fields, providing valuable experience for virtual asset regulation in other countries and regions."

"The issuance of Asian spot Bitcoin and Ethereum ETFs provides retail and institutional investors with an excellent tool for safely, efficiently, and conveniently allocating digital assets," said Zhu Haokang, head of digital asset management and family wealth management at Huaxia Fund (Hong Kong).

Will Attract More Investors to Participate

Bitcoin is often regarded as "digital gold," while Ethereum serves as the foundational platform for smart contracts and decentralized applications, being the core of blockchain technology. This model of directly using Bitcoin or Ethereum for subscription and redemption not only brings strong trading flexibility to investors but also offers global investors the possibility to explore new digital asset investment channels, which is generally believed by market analysts to attract more investors to participate.

Harvest International stated that these products not only lower the participation threshold but also enhance investment flexibility and market transparency by providing options for physical subscriptions and redemptions. "Through this product expansion, Harvest International will further lower the barriers for investors to enter the digital asset market, effectively address regulatory and custody challenges, and promote the circulation, popularization, and investment security of crypto assets. These measures are expected to improve the financial ecosystem, enhance its transparency and efficiency, thereby boosting investor confidence."

From HashKey Capital's perspective, the approval of the listing of virtual asset spot ETFs by Hong Kong regulators has built a bridge for traditional institutions to allocate virtual assets, greatly broadening the exposure of mainstream and retail investors to virtual assets.

"The approval of this virtual asset spot ETF, along with the innovative introduction of a cryptocurrency subscription mechanism—allowing investors to directly use Bitcoin and Ethereum to subscribe for corresponding ETF shares—is expected to further promote the development of the virtual asset market in Hong Kong and throughout Asia, attracting more global capital inflow and stimulating the underlying vitality of Hong Kong's virtual asset market," Bosera International added.

As cryptocurrency ETFs become increasingly popular in Hong Kong's institutional and retail markets, Zhu Haokang expects such products to be warmly welcomed by the market. "Hong Kong's spot cryptocurrency ETFs, compared to physical cryptocurrencies, are recognized by regulatory authorities, listed on traditional exchanges, managed by professional fund companies, and partnered with regulated cryptocurrency exchanges, along with the globally pioneering physical subscription and redemption mechanism, are expected to attract crypto asset investors looking to convert physical cryptocurrencies into ETF products."

Future Competition May Be Very Intense

Rebecca Sin, an ETF analyst at Bloomberg Industry Research, admitted that competition for Bitcoin ETFs may be fierce, as issuers show differentiation in fees, issuance, and stock codes.

According to public information, Harvest will reduce management fees to zero in the first six months, after which it will charge 30 basis points, which may be the first time in recent years that ETF fees have been waived in Hong Kong. Meanwhile, Huaxia Fund is trying to replicate the successful distribution strategy of Southern Eastern England, using a higher management fee of 0.99% to pay for distributor rebates. Bosera's catchy codes 3008.HK and 3009.HK (one of which contains the number 8, considered auspicious by Chinese people) can help investors recall the ETFs and bring in capital inflows.

"Each ETF's market maker and virtual asset platform are also different, which may bring slight advantages at launch. Fees may also vary, so investors need to pay attention to the total ownership cost of each ETF," Rebecca Sin explained.

In fact, to respond to the issuance and listing of the aforementioned products, Bosera International stated that it will collaborate with HashKey Capital to leverage both parties' leading expertise and ecological resources in traditional finance and the virtual asset industry to jointly promote the issuance of Bitcoin and Ethereum spot ETFs, providing investors with safe, compliant, and convenient ways to directly participate in the markets of these two mainstream virtual assets.

Facing the challenges posed by existing ETFs based on Bitcoin futures traded on the CME, Harvest's related products will address issues such as excessive margin requirements, price premiums caused by shortfalls, and rolling losses through Bank of China International UK Trust Co., Ltd. and OSL Digital Securities Limited, the first digital asset platform licensed by the Hong Kong Securities and Futures Commission, to more accurately reflect the real-time value of Bitcoin and Ethereum.

To support and align with Hong Kong's goal of developing a Web 3.0 ecosystem, Huaxia Fund (Hong Kong) will also focus on product innovation and differentiated strategies to meet customer investment needs for emerging asset classes.