Which Hong Kong cryptocurrency ETF is the strongest? A detailed analysis of the similarities and differences in the issuance details of the "three parties."

整理：JIN，Techub News

Bitcoin and Ethereum Spot ETFs Approved for Listing in Hong Kong

On Wednesday, April 23, the Hong Kong market celebrated a significant milestone in the virtual asset sector, as three asset management companies: Huaxia Fund, Harvest Fund, and Bosera Fund, successfully received approval to issue Bitcoin and Ethereum spot ETF products in Hong Kong. Bitcoin/Ethereum spot ETFs: ⎡ are a type of exchange-traded fund (a highly liquid fund that trades like stocks during trading days), primarily determined by holding a large amount of cryptocurrency spot to track the price of Bitcoin. Similar to gold spot ETFs⎦.

This type of product is being launched for the first time in the Asian market, aiming to provide investors with investment returns closely related to the spot prices of Bitcoin and Ether. Virtual asset spot ETFs simplify the investment process and lower the entry barrier. Specialized fund management brings standardized investment operations and risk control systems. Investors can trade these ETF products on major securities trading platforms, which not only reduces operational complexity but also lowers risk. Additionally, these ETF products support actual subscriptions and redemptions, allowing investors to hold ETFs to gain exposure to Bitcoin without worrying about private key storage and asset security issues.

Currently, these ETF products support cash or Bitcoin subscriptions, but operations must be conducted through accounts opened in Hong Kong. According to a newly confirmed financial report, the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority issued a joint announcement in December 2023 stating that neither existing virtual asset futures ETFs nor future spot ETFs may be offered to retail investors in restricted regions such as mainland China. However, non-permanent residents of Hong Kong, who only need to hold a Hong Kong ID, have the opportunity to participate in trading these ETF products, provided they comply with relevant regulations.

Details of the Virtual Asset ETFs from Three Asset Management Companies

What are the differences among the cryptocurrency ETFs issued by the three institutions, and which one should investors choose for purchase and trading? We have compiled detailed information based on data provided by a financial institution in Hong Kong for investors to make informed choices according to their own situations.

Listing Date and Issuance Price:

All three companies' ETF products will be listed on the same day, April 30, 2024. For the initial issuance price, Huaxia Fund and Harvest Fund set their opening price at $1, while Bosera Fund will price its ETF based on the CF Bitcoin Index price of 0.0001 from the CME at 4 PM Hong Kong time on April 26.

Share Trading and Subscription Requirements:

For the number of shares per transaction, Huaxia Fund and Harvest Fund set the equity at 100 shares, while Bosera Fund sets it at 10 shares. For the minimum subscription amount, Huaxia Fund and Bosera Fund require a minimum of 100,000 shares, while Harvest Fund requires at least 50,000 shares.

Creation or Redemption Policies:

All three companies support investors in creating or redeeming ETF shares through cash or physical assets, providing flexibility for investors.

Trading Currencies and Management Fees:

Huaxia Fund supports trading in USD, HKD, and CNY, while Harvest Fund and Bosera Fund support USD and HKD. Regarding management fees, Huaxia Fund charges a fee of 0.99%, Harvest Fund does not charge a management fee for the first month, then charges 0.3%, and Bosera Fund waives fees for the first four months, then charges 0.6%.

Selected Indices and Custodian Institutions:

All three companies' ETF products have chosen the CME CF Bitcoin Index as their tracking index to ensure that the products' performance closely aligns with the actual dynamics of the Bitcoin market. For custodians, Bank of China International UK Trust has been selected as the custodian for these ETFs, with Huaxia Fund and Harvest Fund choosing OSL Digital Securities Limited, while Bosera Fund has chosen Hash Blockchain. This choice reflects the differing preferences of each company regarding asset custody and risk management.

The "CME CF Bitcoin Index" is a specific index that reflects the weighted average price of Bitcoin across different exchanges. The mention of Bitcoin and Ethereum spot ETFs tracking the CME CF Bitcoin Index means that these ETFs aim to replicate the performance of this index accurately, providing investors with returns similar to purchasing actual Bitcoin, but through a more convenient and regulated method.

The "sub-custodian" is typically another financial institution appointed by the custodian to provide custody services in specific regions or for certain types of assets. Sometimes, due to legal, market practices, or operational efficiency reasons, specialized sub-custodians are needed to handle certain specific custody functions. This is primarily for management efficiency and risk diversification, ensuring the security of fund assets and adapting to the needs of different markets.

Trading Platforms, Market Makers, and Participating Brokers:

In terms of virtual asset trading platforms, both Huaxia Fund and Harvest Fund have chosen OSL Exchange, while Bosera Fund has chosen HashKey Exchange. For market makers, Huaxia Fund has selected Vivienne Court Trading, Harvest Fund has chosen China Merchants Securities (Hong Kong), CITIC Lyon Securities, and Virtu Financial Singapore, while Bosera Fund's market maker has not been disclosed. Participating brokers play a key role in the circulation of ETF products, with Huaxia Fund and Harvest Fund selecting contracted institutions including Victory Securities, Future Asset Securities (Hong Kong), Huaying Oriental (Asia) Holdings, Ad Capital, and Huasheng Securities, with Harvest Fund additionally selecting China Merchants Securities (Hong Kong).

"Authorized Participants (APs)" are typically large financial institutions that work with ETF issuers to facilitate the creation and redemption process of ETFs. Authorized Participants can provide a basket of stocks or other assets to the ETF in exchange for newly issued ETF shares or redeem ETF shares for the underlying assets held by the fund. This process helps ensure that the market price of the ETF is close to its net asset value (NAV) and contributes to liquidity and market efficiency.

Role of Auditing Firms:

Finally, to ensure the integrity and compliance of the ETF's financial reporting, Huaxia Fund and Harvest Fund have chosen PwC as their auditor, while Bosera Fund has selected Ernst & Young. Through an independent auditing process, auditors ensure the accuracy and authenticity of the ETF's financial reports.

"Auditors" are independent third parties responsible for auditing the ETF's financial statements to ensure fairness, accuracy, and compliance with accounting standards. Auditors can detect and prevent errors and fraudulent activities in financial statements, providing investors with confidence in the ETF's financial status. In some jurisdictions, the auditor's report is a benchmark requirement for disclosing ETF financial information to regulatory authorities and the public.

Bloomberg Statistics on the Asset Management Scale of the Three Companies

Asset Management Scale and Number of Issued ETFs:

According to Bloomberg Intelligence, Huaxia Fund has an asset management scale of $55.7 billion in mainland China and has issued 84 ETFs, while in Hong Kong, Huaxia Fund manages $3.6 billion in assets and has issued 15 ETFs. Harvest Fund has an asset management scale of $10.3 billion in mainland China, issuing 42 ETFs, and an asset management scale of $1.6 million in Hong Kong, issuing 4 ETFs. Bosera Fund has an asset management scale slightly lower than Harvest Fund at $10.7 billion, issuing 43 ETFs, with an asset management scale of $4 million in Hong Kong, issuing 6 ETFs.

With the widespread adoption of virtual assets, these ETF products in Hong Kong provide new opportunities for global investors while reflecting Hong Kong's volatility as an international financial center in innovative financial products. Investors indicate that these ETF products undoubtedly offer noteworthy options.