Hong Kong's financial market has reached a significant milestone. On April 24, the first batch of virtual currency spot ETF products received approval from the Securities and Futures Commission (SFC). Leading asset managers, including Bosera International, China Asset Management (Hong Kong), and Harvest Global Investments, announced that their applications for Bitcoin and Ethereum spot ETFs have been approved. These products are expected to list on the Hong Kong Stock Exchange by the end of April.
This development marks a historic moment for Asia’s financial industry. Once successfully issued, these will be the first Bitcoin and Ethereum spot ETFs in the region. Market analysts believe this move could position Hong Kong as the world’s second-largest market for Bitcoin spot ETFs, while also strengthening the city’s openness and competitiveness in the Web3 ecosystem.
The newly approved virtual asset spot ETFs have also begun their fundraising processes. Notably, these ETFs allow both cash (in-cash) and in-kind (physical digital asset) subscriptions and redemptions.
A representative from HashKey Exchange, a licensed virtual asset exchange in Hong Kong, commented: “We have successfully assisted Bosera Fund (International) and HashKey Capital in completing the first in-kind subscriptions for the Bosera HashKey Bitcoin Spot ETF and the Bosera HashKey Ethereum Spot ETF. In-kind redemptions offer advantages in cost and liquidity since the underlying assets do not need to be sold immediately. This enables investors to directly access Bitcoin and Ethereum through the ETF structure, providing more diversified options for digital currency investors.”
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Management Fees and Product Details
According to SFC regulations, virtual asset-related activities require specific licenses. For example:
- A Type 1 license allows licensed firms to trade virtual asset financial products on behalf of clients.
- A Type 7 license permits automated trading services for virtual assets.
- A Type 9 license authorizes the management of investment portfolios focused on virtual assets.
Platforms like HashKey and OKX already hold Type 1 and Type 7 licenses.
On April 15, China Asset Management (Hong Kong), Bosera International, and Harvest Global Investments expanded their existing Type 9 licensed businesses to include virtual asset-related asset management services.
The SFC officially published the list of approved virtual asset spot ETFs on its website on the evening of April 24. The Bitcoin and Ethereum spot ETF applications from all three asset managers were included.
Here’s a breakdown of the management fees:
- Harvest Global Investments charges a 0.3% management fee, with a waiver for the first six months.
- Bosera International charges 0.6%, with a waiver for the first four months after issuance.
- China Asset Management (Hong Kong) charges 0.99%.
Bitcoin and Ethereum spot ETFs track the real-time prices of Bitcoin and Ethereum. This allows investors to gain exposure to these digital assets indirectly by purchasing shares of the ETFs listed on the Hong Kong Stock Exchange.
Bosera International stated that the approval of these spot ETFs, along with the innovative in-kind subscription mechanism that allows investors to use Bitcoin and Ethereum directly to purchase ETF shares, is expected to foster the development of virtual asset markets in Hong Kong and across Asia. This could attract more global capital and enhance market vitality.
Zhu Haokang, Head of Digital Asset Management and Family Wealth at China Asset Management (Hong Kong), noted: “The launch of spot Bitcoin and Ethereum ETFs in Asia offers retail and institutional investors a secure, efficient, and convenient tool for allocating digital assets.”
Potential Market Impact and Capital Inflow
How much capital could flow into Hong Kong’s Bitcoin spot ETFs? Estimates vary widely, ranging from $500 million to over $10 billion.
Optimists point to the U.S. market, where Bitcoin spot ETFs attracted approximately $10 billion within two months of launch, reflecting strong demand from traditional investors. A more conservative estimate suggests around $500 million for Hong Kong, considering the relative size of its ETF market—approximately $52 billion, compared to over $8 trillion in the U.S. Markets in Japan ($533.8 billion) and South Korea ($91.3 billion) are also larger.
According to an Eastern Securities research report, a key factor in determining the scale of capital inflows will be whether southbound capital (from mainland China) can participate and whether the ETFs can attract investors from other Asian regions like Japan and South Korea.
Issuers and custodians of Bitcoin spot ETFs in Hong Kong are likely to benefit. Issuers can expect significant commission income, while custodians may see increased fees for custody and transaction services.
Yu Jianing, Executive Director of the Metaverse Industry Committee at the China Mobile Communications Association, stated: “The launch of Bitcoin and Ethereum spot ETFs in Hong Kong will have a profound systemic impact, reshaping the global virtual asset market ecosystem across multiple dimensions. From an investor perspective, Hong Kong, as an international financial center, will play a key role in enhancing regulatory order and transparency. Under Hong Kong’s mature ETF regulatory framework, virtual asset ETFs are expected to significantly lower the operational barriers to virtual asset investment and improve the quality of information disclosure. This will attract more institutional and large-scale investors, broadening the investor base. At the same time, investing in virtual assets through ETFs offers better risk management tools and supports portfolio diversification.”
Frequently Asked Questions
What are cryptocurrency spot ETFs?
Cryptocurrency spot ETFs are exchange-traded funds that directly hold the underlying digital assets, such as Bitcoin or Ethereum. They track the real-time market price of the asset and allow investors to gain exposure without holding the cryptocurrency directly.
How can investors subscribe to these ETFs?
Investors can subscribe using either cash (in-cash) or by transferring actual cryptocurrencies (in-kind). This provides flexibility and can offer cost and liquidity benefits depending on the method chosen.
What licenses are required to offer virtual asset services in Hong Kong?
Firms need specific SFC licenses: Type 1 for dealing in securities, Type 7 for automated trading services, and Type 9 for asset management. Platforms like HashKey and OKX hold Type 1 and Type 7 licenses.
What are the benefits of investing via ETF instead of direct ownership?
ETFs provide a regulated, familiar investment vehicle with enhanced security, liquidity, and transparency. They simplify taxation, reduce custody risks, and make it easier for traditional investors to access digital assets.
How do management fees compare among the new ETFs?
Fees vary by issuer. Harvest charges 0.3% with a 6-month waiver, Bosera charges 0.6% with a 4-month waiver, and ChinaAMC charges 0.99%. It’s important to compare fees and waiver periods when choosing a product.
Will these ETFs attract international investors?
Yes, analysts believe these products may attract capital from across Asia and beyond, especially if southbound investment channels from mainland China are opened and investors from markets like Japan and Korea participate.