The launch of a spot Bitcoin and Ethereum exchange-traded fund (ETF) in Hong Kong, approved by regulators on April 30, marks a significant departure from its U.S. counterpart, offering distinctive features tailored to the local market. China Asset Management, one of the issuers, revealed that its ETF will track the performance of the CME Cryptocurrency Index, with redemptions available through both fiat and cryptocurrency funds. Additionally, the ETF will be denominated in three currencies: the U.S. dollar, Hong Kong dollar, and renminbi. Custodianship for the ETF will be managed by investment asset manager BOC Prudential and cryptocurrency exchange OSL.
BOC International and OSL will also oversee Bitcoin and Ethereum ETF spot assets for issuer Harvest Global, addressing concerns such as excessive margin requirements and rollover losses. This move aims to more accurately reflect the real-time value of Bitcoin and Ethereum. HashKey Capital, based in Hong Kong, will collaborate with Boshi Asset Management to launch their own spot Bitcoin and Ethereum ETFs. In anticipation of future developments in crypto ETFs, staff from HashKey Capital expressed optimism, suggesting that the approval of virtual asset spot ETFs and the introduction of innovative subscription mechanisms could attract more global capital inflows to Hong Kong and the broader Asian market.
However, Bloomberg senior ETF analyst Eric Balchunas noted that management fees for the Hong Kong Bitcoin ETF are expected to range from 0.3% to 0.99%, considerably higher than those for U.S. spot Bitcoin ETFs, some of which charge less than 0.25% annually. This discrepancy could potentially lead to a fee war among ETF providers in Hong Kong, according to Bloomberg analyst James Seyffart. All three ETF issuers will facilitate the creation and redemption of ETF shares on regulated cryptocurrency exchanges in Hong Kong, including OSL and HashKey. Investors will have until 11:00 a.m. local time each day to exchange their shares for cash or withdraw cryptocurrencies by 4:00 p.m. BOCI Prudential will serve as the custodian for all issuers, with market makers such as Vivienne Court and Virtu Financial also playing key roles.
