On April 30, Hong Kong Bitcoin Spot ETF and Ethereum Spot ETF officially landed on the Hong Kong Stock Exchange and ushered in their first trading day.
Previously, according to Cailianshe, China Asset Management (Hong Kong), Harvest Global, and Bosera International announced that the first batch of Hong Kong Bitcoin spot ETF and Ethereum spot ETF products applied by the three fund subsidiaries have been approved by the Hong Kong Securities Regulatory Commission and are scheduled to be issued on April 29 and listed on the Hong Kong Stock Exchange on April 30. This is the first time such products have been launched in the Asian market. These two types of products are designed to provide investment returns that are close to the spot prices of Bitcoin and Ethereum (before deducting fees and expenses). In the industry's view, the issuance of Asian spot Bitcoin and Ethereum ETFs provides retail and institutional investors with a safe, efficient and convenient tool for configuring digital assets.
This move is called a major moment in Hong Kong's financial history. Yesterday, China Asset Management (Hong Kong) Co., Ltd. held a press briefing on "Asia's first launch - Spot China Asset Bitcoin ETF and Spot China Asset Ethereum ETF". The press briefing was answered by Zhu Haokang, head of digital asset management and family wealth at China Asset Management (Hong Kong), and Wayne Huang, head of OSL ETF and custody business. Zhu Haokang, head of digital asset management and family wealth at China Asset Management (Hong Kong), said that he is very confident that the initial launch scale of Hong Kong's virtual asset spot ETF (more than US$125 million) will exceed the issuance scale on the first day in the United States. The issuance scale of the 10 US Bitcoin spot ETF issuers on the first day of January 10 this year was US$125 million. China Asset Management is confident that it will become the ETF issuer with the largest initial launch scale among the three issuers. The answer to this mystery can be revealed to everyone at 9:30 am today.
The following is the Q&A content, which was compiled by Foresight News on the spot for readers’ reference.
What does China Asset Management (Hong Kong) think about the scale of capital inflows on the first day of trading of the Hong Kong cryptocurrency ETF tomorrow?
Zhu Haokang: I am very confident that the initial issuance scale of the Hong Kong virtual asset spot ETF (more than 125 million US dollars) can exceed the issuance scale of the first day in the United States. The issuance scale of the 10 US Bitcoin spot ETF issuers on the first day of January 10 this year was 125 million US dollars. China Asset Management is confident that it will become the ETF issuer with the largest initial issuance scale among the three issuers. The specific answer can be revealed to everyone at 9:30 am tomorrow. Wayne Huang: There will be an announcement from the Hong Kong Stock Exchange at 9:30 am tomorrow, but OSL has indeed completed the first day of the first fundraising transaction on OSL with two funds (including China Asset Management and another fund that cooperates with us) today. From the numbers, it is indeed far more than the capital inflow of the first day of listing and trading of the US Bitcoin spot ETF.
What is the difference between the spot Huaxia Bitcoin ETF and the spot Huaxia Ethereum ETF and other ETFs?
Zhu Haokang: The first difference is that compared with the US spot Bitcoin ETF, we have spot and physical subscription and redemption, which is not available in the US spot Bitcoin ETF. In addition, there are two differences between China Asset Management's products and the other two: China Asset Management's Hong Kong spot ETF is the only ETF with Hong Kong dollar, US dollar and RMB counters. The second is that in addition to listed shares, we have unlisted shares. These two points are not available in the other two.
In addition to Hong Kong, which other places have investors participated in the Hong Kong virtual asset spot ETF?
Zhu Haokang: Thanks to the physical subscription method, first of all, investors, including Bitcoin mines, can use their Bitcoin to directly purchase virtual asset spot ETFs in Hong Kong. Secondly, in countries and regions outside Hong Kong that have not yet issued ETFs, such as Singapore and the Middle East, we have also contacted a large number of investors with great interest. In addition, although the current spot Bitcoin ETF market in the United States is very large, compared with the United States, Hong Kong uses cash and physical subscriptions, and is open for trading during the Asian trading hours, which will still attract many American investors. Finally, many family offices in Asia and overseas are also very interested in spot crypto ETFs.
Is Shengli Securities the only brokerage firm currently eligible to conduct related transactions in physical subscription?
Wayne Huang: Not only Shengli Securities can do physical subscription, but also Huaying Securities can do it with the support of OSL. Currently, there are three securities companies that can do physical subscription, and there will be more to follow. So after the ETF is listed tomorrow, many securities companies will follow up, and it is possible that more securities companies will participate in the entire ecosystem of virtual asset ETFs in May.
What are the specific operations for physical purchase?
Wayne Huang: Physical subscription is an innovation that distinguishes Hong Kong ETFs from US ETFs. First, the brokerage company needs to upgrade its Type 1 license to be able to handle virtual asset transactions. Investors transfer their coins to OSL through this brokerage, and then finally transfer the equity to the fund's custodial account to complete the entire physical subscription process.
What is OSL's anti-money laundering process in physical subscription? Can it accept that the counterparty is the wallet of the other exchange?
Wayne Huang: First, investors must open an account with OSL through a broker. We will do a whitelist verification on the wallet that is about to deposit coins to prove that the wallet is held and controlled by the investor. Secondly, we will do some screening on the investor's private wallet to see if there are any suspicious transactions in the wallet's past dozens of transactions on the chain. Only wallets that pass the whitelist verification can allow him to deposit money. Can the wallet be a wallet of the other exchange? In theory, this can be done. If the anti-money laundering rules of the other exchange are consistent with the rules of OSL, we can accept the other party to transfer the coins, but the other exchange needs to provide certain customer information.
Can Hong Kong's cryptocurrency spot ETF be opened to mainland investors? Or is there a possibility of opening it to mainland investors in the future?
Zhu Haokang: Currently, mainland Chinese investors are not allowed to invest in Hong Kong's cryptocurrency spot ETFs. Hong Kong's qualified investors, institutional investors, retail investors, and international investors who meet the requirements can all invest in cryptocurrency spot ETFs. You can consult brokers and sales channels for details, and continue to pay attention to whether there will be corresponding regulatory adjustments or specific regulatory frameworks in the future.
Hong Kong's Ethereum spot ETF is the first of its kind in the world, but if the United States finally determines that "Ethereum" is a security, will it affect Hong Kong's Ethereum spot ETF?
Wayne Huang: Probably not, because whether the United States defines Ethereum as a security does not affect the independent decision of the Hong Kong Securities and Futures Commission. The Hong Kong Securities and Futures Commission has its own set of procedures for whether a virtual asset is a security and whether it can be opened to retail traders. The different opinions between various departments in the United States, or their own unilateral definition in the end, will not affect the legal definition in Hong Kong. I would also like to emphasize why Hong Kong can be the first in the world to launch an Ethereum spot ETF, rather than the United States? The United States has multiple departments speaking out at the same time or trying to regulate cryptocurrencies. It has been decided early on who should regulate cryptocurrencies in Hong Kong, that is, the Securities and Futures Commission. The Securities and Futures Commission has given some very clear regulatory frameworks. Hong Kong has already had a clear definition of Ethereum. Ethereum is not a security, but the first non-securities virtual asset to be included in Hong Kong's supervision together with Bitcoin, and it is one of the two targets that can be provided to retail investors for trading.
Will Hong Kong launch ETFs for other virtual assets?
Wayne Huang: For the time being, there are only Bitcoin and Ethereum. We have repeatedly discussed with the Securities and Futures Commission the process of how to list coins for compliance transactions in Hong Kong. Let me briefly share it. First, the issuer of the virtual asset or we ourselves need to find a legal opinion to explain whether the coin is a security or a non-securities, and turn the legal opinion and our due diligence on the coin into a detailed research report and submit it to the Securities and Futures Commission. After the Securities and Futures Commission approves it, it will first be opened to professional investors. When it reaches a certain liquidity and is included in an index for a period of time, we can apply to the Securities and Futures Commission to upgrade the coin to be traded by retail investors. But so far, after 4 years of operation, OSL still has only Bitcoin and Ethereum, two assets, that can be traded by retail investors. That is to say, for the time being, only these two coins meet the conditions for launching ETFs, but we have been discussing and studying with the Securities and Futures Commission.
Will you consider launching ETFs such as inverse leverage of virtual assets?
Zhu Haokang: ETFs are full of financial attributes, which involve many financial product innovations. We have also seen some international investment banks make some financial innovations and develop derivatives based on existing US products. We are also paying close attention and communicating with a large number of investment banks and securities firms. To give a simple example, the Hong Kong Stock Exchange also allows ETFs to be shorted and even to do margin trading. We are also communicating with partners to create more returns and more financial product innovations for our ETF investors.
What do you think about whether cryptocurrency ETFs will affect the price of cryptocurrencies in the future?
Zhu Haokang: Based on a variety of factors, we believe that cryptocurrency ETFs will be beneficial to cryptocurrency prices. First, Hong Kong's crypto spot ETF market injects more liquidity into the crypto market. Second, it accelerates the compliance of the industry. Third, it expands funding channels. Fourth, investors may get arbitrage opportunities between ETF prices and spot prices, allowing more market makers and arbitrage investors to actively participate. Fifth, with the passage of our crypto spot ETF, the trading factors of the traditional market will also directly affect the cryptocurrency market. Sixth, we believe that Hong Kong's regulatory framework is relatively clear, which provides great convenience for the issuance of Bitcoin and Ethereum ETF products. Seventh, we believe that Hong Kong, as an international financial center, will attract more Chinese investors to trade in the Asian time period, improve market liquidity, and perform better than similar products in Europe or Canada.
Hua Xia’s rates are higher than those of the other two Hong Kong companies. Are you worried about lack of competitiveness?
Zhu Haokang: I think everyone is more concerned about the rate issue.
First of all, China Asset Management's fee structure in Hong Kong fully complies with the standards for thematic and complex ETFs listed in Hong Kong. You can refer to the fee standards of cryptocurrencies, futures ETFs and various thematic ETFs that have been listed in the past. Our fees are lower than those of similar types.
Second, our products provide very high flexibility in trading options. They not only support listed and unlisted shares, but also support all three types of counter transactions: USD, HKD and RMB. This is our unique advantage.
Third, the complexity and innovation of the products determine the importance of our risk management and operational stability.
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