Breaking News from Chinese State Media! Launch of Hong Kong's First Spot ETF for Virtual Assets by Harvest Fund and China Asset Management with an Issue Price of $1 - "Not for Sale to Mainland Investors"

Chinese media reported on Monday (April 29) that the Hong Kong market welcomed a historic moment with the debut of Bitcoin and Ethereum spot ETFs. The Hong Kong Securities and Futures Commission publicized six new virtual asset spot ETFs, launching on Monday and officially listing on the Hong Kong Stock Exchange on Tuesday. The issue price for Harvest Fund and China Asset Management is reported at $1.

According to the China Fund News, these six virtual asset spot currency ETFs under Harvest Fund International, Bosera International, and China Asset Management were approved by the Hong Kong Securities and Futures Commission. They launched on April 29 and will officially list on April 30. These six ETFs exhibit differences in product fees, trading, issuance, and virtual asset platform operations.

Analysts expect that the asset management scale of Hong Kong’s spot Bitcoin and Ethereum ETFs could potentially reach $1 billion in the future. However, achieving this goal may depend on the speed of improvements to infrastructure and the ecosystem.

Specifically, these six products are managed by China Asset Management (Hong Kong), Bosera International, and Harvest Fund International, each offering both Bitcoin and Ethereum spot ETFs. The operation of these products is aimed directly at tracking the performance of Bitcoin and Ethereum.

Since Bitcoin and Ethereum are virtual assets, to avoid confusion, these ETFs invest 100% of their assets in Bitcoin or Ethereum, and do not engage in other types of investments. They also avoid financial derivatives, securities lending, repurchase or reverse repurchase transactions, and any form of leverage, retaining only a minimal cash balance for operational expenses or to cover redemptions.

In terms of management fees, Harvest Fund's Bitcoin and Ethereum spot ETFs charge an annual fee of 0.3% of net asset value, waived for the first six months after listing. Bosera's Bitcoin and Ethereum spot ETFs charge 0.6% annually, with fees temporarily waived from the listing date on April 30, 2023, until August 2024. China Asset Management’s Bitcoin and Ethereum spot ETFs charge an annual fee of 0.99%.

Regarding issue prices, Harvest Fund International and China Asset Management’s products are priced at $1 per share. The initial issue prices of Bosera’s Bitcoin and Ethereum ETFs correspond roughly to 0.0001 of a Bitcoin and 0.001 of an Ethereum as of April 26, 2024, implying that owning 10,000 shares is equivalent to one Bitcoin, and 1,000 shares to one Ethereum.

The trading units for Harvest Fund International's Bitcoin/Ethereum spot ETFs are at least 100,000 shares (or multiples thereof) on the primary market, with a minimum trading unit of 100 shares on the secondary market; Bosera’s Bitcoin spot ETF requires a minimum of 50,000 shares (or multiples thereof) on the primary market and 10 shares on the secondary market, while the Ethereum ETF also requires at least 100,000 shares on the primary market and 10 shares on the secondary market.

Moreover, compared to the products of Harvest Fund International and Bosera International, the Bitcoin and Ethereum spot ETFs of China Asset Management (Hong Kong) also feature a renminbi counter.

Industry experts believe that while there may be differences in fees, issuance, trading arrangements, and the market makers and virtual asset platforms for each ETF, investors need to be aware of the total cost of ownership of each ETF.

The SEC approved the world's first spot Bitcoin ETFs on January 11, formally ushering cryptocurrencies like Bitcoin into the mainstream traditional markets.

According to Bloomberg data, within just about three months of listing, the U.S. spot Bitcoin ETFs continued to see massive inflows, reaching nearly $58.9 billion.

China Asset Management (Hong Kong) believes that in the new economic era, the digital economy created by Web3.0 represents one of the most promising investment opportunities. Cryptocurrencies, including Bitcoin and Ethereum, which are backed by their technical advantages and investor interest, have become the “top stream” of crypto assets.

“Following the issuance of spot Bitcoin ETFs in the United States, the Hong Kong market is poised to become the first in Asia to issue spot Bitcoin and Ethereum ETFs. Cryptocurrency ETFs are expected to gain increasing recognition in more markets. As more investors broadly engage in cryptocurrency investments, assets like Bitcoin and Ethereum are likely to soon become mainstream assets in the new economic era,” said China Asset Management (Hong Kong).

Bloomberg's ETF Asia Pacific Chief Analyst, Xian Sujun, noted that the asset management scale of Hong Kong's Bitcoin and Ethereum spot ETFs could reach $1 billion, but achieving this target may depend on the pace of improvements in infrastructure and the ecosystem.

Xian Sujun also mentioned that both retail and institutional investors in Hong Kong have shown strong demand for ETFs, indicating interest in virtual assets. However, the innovative nature of virtual asset ETFs means that the necessary infrastructure will require time to mature, with HashKey and OSL being the only two approved trading platforms for such transactions in Hong Kong. As the ETF ecosystem develops, competition in the market is expected to intensify, likely leading to increased capital flows, more accurate pricing, narrower spreads, enhanced liquidity, and lower fees.

Mainland Chinese investors are not allowed to participate in trading

State media pointed out that the issuance and listing of Hong Kong's spot cryptocurrency ETFs mean that investors can hold virtual assets through traditional securities investment accounts without needing to set up additional virtual asset wallets or trading accounts.

It is reported that the spot cryptocurrency ETFs in Hong Kong are open to both professional and retail investors in the city. For Hong Kong investors, upon completing basic KYC (Know Your Customer) procedures and passing a cryptocurrency knowledge test, they can purchase the spot Bitcoin and Ethereum ETFs. Conversely, Hong Kong investors must be professional investors with a high investment threshold to purchase corresponding U.S. ETFs.

"Mainland Chinese investors are currently not allowed to participate in trading," emphasized the official media.

The joint circular issued by the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority on December 22, 2023, regarding the activities of intermediaries in virtual assets, stated that both existing virtual asset futures ETFs and upcoming virtual asset spot ETFs in the Hong Kong market are not to be sold to retail investors in regions like Mainland China where the sale of virtual asset-related products is prohibited.