The Hong Kong market welcomes a historic moment as Bitcoin spot ETF and Ethereum spot ETF shine on the scene!
The Hong Kong Securities and Futures Commission has approved six virtual asset spot currency ETFs under Huaxia Hong Kong, Bosera International, and Jia Shi International, which will be first issued on April 29 and officially listed on the Hong Kong Stock Exchange on April 30. These six ETFs show certain differentiation in terms of product expenses, trading, issuance, and virtual asset platforms.
Analysts expect that the asset management scale of Hong Kong spot Bitcoin and Ethereum ETFs is expected to reach $1 billion in the future, but whether this goal can be achieved may depend on the speed of improvement of the infrastructure and ecosystem.
Hong Kong Virtual Asset Spot ETF Issued on April 29
The Hong Kong Securities and Futures Commission recently announced the first issuance of six virtual asset spot ETFs, which will be first issued on April 29 and officially listed on the Hong Kong Stock Exchange on April 30.
Specifically, these six products belong to Huaxia (Hong Kong), Bosera International, and Jia Shi International, each of which has two products: Bitcoin spot ETF and Ethereum spot ETF. These products operate with the investment objective of closely tracking the performance of Bitcoin/Ethereum (measured by the investment results based on the CME CF Bitcoin Index or the Ethereum Index (Asia-Pacific closing price) (net of expenses and before expenses)).
As Bitcoin and Ethereum are virtual assets, to avoid doubt, these ETF funds will invest 100% of their assets in Bitcoin or Ethereum and will not engage in other types of investments, financial derivative instruments, securities lending, repurchase or reverse repurchase transactions, or any form of leverage, and may retain a small amount of cash for expenses or redemptions.
In fact, Bitcoin and Ethereum, as virtual assets, also have differences. Bitcoin is the first digital currency to use blockchain technology for online payment transactions, while Ethereum is based on blockchain technology that allows smart contracts to run on decentralized applications.
Not only that, these products differ slightly in terms of expenses, issuance, trading, and platforms.
First, in terms of management fees, Jia Shi Bitcoin and Ethereum spot ETFs have an annual management fee of 0.3% of net asset value, but are exempt from fees for the first 6 months from the listing date. Bosera Bitcoin and Ethereum spot ETFs have an annual management fee of 0.6% of net asset value, temporarily exempted from fees from the listing date on April 30 until August 2024. This may be the first time in recent years that ETF fees have been exempted in Hong Kong. Meanwhile, Huaxia Bitcoin and Ethereum spot ETFs have an annual management fee of 0.99%.
In terms of issuance price, Jia Shi International and Huaxia (Hong Kong) products have an issuance price of $1 per share, while the initial issuance price of Bosera Bitcoin ETF and Ethereum ETF is basically consistent with 1/10000 and 1/1000 of the index tracked on April 26, 2024, meaning that the net asset value of the fund shares corresponds to approximately 0.0001 Bitcoin price and 0.001 Ethereum price after conversion, indicating that holding 10,000 shares is approximately equivalent to 1 Bitcoin, and 1,000 shares is approximately equivalent to 1 Ethereum.
In terms of trading units, Jia Shi International's Bitcoin/Ethereum spot ETFs have a minimum application of 100,000 shares (or multiples thereof) in the primary market, and a minimum trading unit of 100 shares in the secondary market; Bosera Bitcoin spot ETF has a minimum application of 50,000 shares (or multiples thereof) in the primary market, and a minimum trading unit of 10 shares, while the Ethereum ETF has a minimum application of 100,000 shares (or multiples thereof) in the primary market, and a minimum trading unit of 10 shares in the secondary market.
In addition, compared to the products of Jia Shi International and Bosera International, Huaxia (Hong Kong) Bitcoin spot ETF and Ethereum ETF also have RMB counters.
Professional analysts believe that in addition to differences in expenses, issuance, trading, and other arrangements, each ETF's market makers and virtual asset platforms also differ. Therefore, investors need to pay attention to the total ownership cost of each ETF.
Hong Kong Cryptocurrency Spot ETF Asset Management Scale Expected to Reach $1 Billion
After a decade of discussion, the U.S. Securities and Exchange Commission finally approved the issuance of the world's first spot Bitcoin ETF on January 11, 2024, officially bringing cryptocurrencies such as Bitcoin into the traditional mainstream market.
According to Bloomberg data, within just about 3 months of listing, the U.S. spot Bitcoin ETF has continued to record massive inflows, with a scale approaching $58.9 billion.
Huaxia (Hong Kong) believes that in the new era of the digital economy created by Web3.0, cryptocurrencies are one of the most promising investment opportunities in the future. Cryptocurrencies, especially Bitcoin and Ethereum, with their respective technological advantages and investor attention, have become the "top players" in the cryptocurrency world.
"After the issuance of the spot Bitcoin ETF in the United States, the Hong Kong market is about to become the first market in Asia to issue spot Bitcoin and Ethereum ETFs. Cryptocurrency ETFs are expected to be increasingly recognized by more markets in the future. As more and more investors participate widely in cryptocurrency investments, the ascension of Bitcoin, Ethereum, and other cryptocurrencies to mainstream assets in the new economic era may be just around the corner," said Huaxia (Hong Kong).
Xian Sujun, Chief Analyst of Bloomberg Industry Research ETF Asia-Pacific, stated that the asset management scale of Hong Kong spot Bitcoin and Ethereum ETFs is expected to reach $1 billion, but whether this goal can be achieved may depend on the speed of improvement of the infrastructure and ecosystem.
Xian Sujun also stated that there is strong demand for ETFs from both retail and institutional investors in Hong Kong. However, the innovative nature of these products means that the infrastructure for virtual asset ETFs needs time to mature, and HashKey and OSL are the only two approved trading platforms of this kind in Hong Kong. Once the ETF ecosystem develops, market competition is expected to become more intense, fund flows may increase, pricing will become more accurate, spreads will narrow, liquidity will increase, and fees will decrease.
Mainland Chinese Investors Currently Unable to Participate in Trading
The issuance and listing of Hong Kong spot cryptocurrency ETFs mean that investors can hold virtual assets through traditional securities investment accounts without the need to establish additional virtual asset wallets and trading accounts.
It is understood that Hong Kong spot cryptocurrency ETFs are open to professional and retail investors in Hong Kong. For Hong Kong investors, on the basis of basic KYC (real-name authentication), as long as they pass the cryptocurrency knowledge test, they can purchase Hong Kong spot Bitcoin and Ethereum ETFs. Hong Kong investors purchasing the corresponding ETFs in the United States must be professional investors with high investment thresholds.
Mainland Chinese investors are currently unable to participate in trading. A joint letter issued by the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority on December 22, 2023, regarding intermediaries' activities related to virtual assets, shows that both existing virtual asset futures ETFs in the Hong Kong market and future spot ETFs for virtual assets cannot be sold to retail investors in prohibited areas such as mainland China.
China Fund News Reporter: Fang Li, Sun Xiaohui
Editor: Captain
Review: Chen Mo
Article Source: Historic Moment! Hong Kong Virtual Asset Spot ETF Shines on the Scene
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