Differences between Hong Kong Spot ETFs and other ETFs
There is no shortage of crypto ETF products in the Hong Kong market, but they are all futures ETFs and are not very attractive to investors.
As early as October 2022, the Hong Kong Securities and Futures Commission approved the issuance of futures-based virtual asset ETFs. At the end of the same year, Southern Asset Management's Hong Kong subsidiary Southern Asset Management officially launched Asia's first batch of cryptocurrency ETFs in Hong Kong: Southern Asset Management Bitcoin Futures ETF and Southern Asset Management Ethereum Futures ETF. The Hong Kong stock market became the first capital market in Asia that can directly provide investors with Bitcoin and Ethereum futures ETFs. There are currently 3 virtual currency ETFs listed in Hong Kong, all of which are virtual asset futures ETFs, mainly issued by Southern Asset Management and Samsung Asset Management (Hong Kong).
As of April 15, the assets under management of CSOP Bitcoin Futures ETF were $115 million, the assets under management of CSOP Ethereum Futures ETF were $28 million, and the assets under management of Samsung Bitcoin Futures ETF were $150 million. Since these three products use margin to participate in the trading of Bitcoin and Ethereum futures listed on CME, they have had little impact on the spot market prices of Bitcoin and Ethereum, and their liquidity is relatively limited. In addition, the management fees of these products are not much better than the fund management fees in the global market. #eth #bnb #wbeth #btc
After the well-known exchange FTX collapsed in 2022, Wang Yi, head of quantitative investment at Southern China Asset Management, said: "Some cryptocurrency platforms have recently encountered liquidity problems. Our two cryptocurrency futures ETFs show that Hong Kong remains open to the development of virtual assets." It is enough to see that the liquidity of futures ETFs is still a core issue of concern to many investors, and therefore the market purchases driven by this are relatively limited.
Three funds approved for Hong Kong spot crypto ETFs, $25 billion coming?
The crypto spot ETF approved this time can largely fill the previous market gap and enhance Hong Kong's competitiveness in the global Web3 market.
Moreover, unlike the Bitcoin spot ETF approved by the US SEC, the Bitcoin spot ETF and Ethereum spot ETF approved by the Hong Kong Securities and Futures Commission this time allow subscription and redemption in cash (in-cash) or in-kind.
For cash subscriptions and redemptions, the fund must obtain virtual assets on a licensed exchange in Hong Kong, either on-exchange or over-the-counter; for physical subscriptions and redemptions, virtual assets must be transferred into or out of the fund's custody account through a broker. Therefore, in terms of investment flexibility and directness, Hong Kong Bitcoin Spot ETF and Ethereum Spot ETF provide investors with more choices and more liquidity possibilities, and also lay the foundation for institutional investors and retail investors to diversify their positions.
