Hong Kong Bitcoin ETF may be listed after the Spring Festival

Source: W3C DAO

Hong Kong Bitcoin Spot ETF will be listed as soon as after the Spring Festival

According to Tencent News' "First Line" report, last Friday (January 26), Harvest Fund Hong Kong Company submitted a Bitcoin spot exchange-traded fund (Exchange Traded Funds, referred to as ETF) application to the Hong Kong Securities Regulatory Commission.

This is the first institution in Hong Kong to submit an application for a Bitcoin spot ETF.

The media reported that the Hong Kong Securities Regulatory Commission hopes to speed up the approval of the first Hong Kong Bitcoin spot ETF. It is planned that the first Hong Kong spot Bitcoin ETF will be launched in Hong Kong after the Spring Festival. Listed on the stock exchange.

The Hong Kong Securities and Futures Commission may follow the practice of the United States, which is to approve applications from several companies at once. As of now, apart from Harvest Fund, no other institution has submitted an application. Although institutions including CSOP have communicated with the Hong Kong Securities Regulatory Commission many times, they have not submitted it yet.

Some family office investment managers in Hong Kong said thatbefore this, due to the complexity of investment categories and operations, they did not directly participate in the investment in the Bitcoin market, but they are interested in Hong Kong’s spot ETFs. There is great interest in subscribing.

However, they also said that there may be some gap between the scale of Hong Kong spot ETF subscriptions and the United States. Compared with spot ETFs in the United States, in addition to accepting legal currency subscriptions, Hong Kong's spot ETFs may also increase the possibility of direct Bitcoin subscriptions.

More than ETFs, according to Bloomberg, people familiar with the matter said that Hong Kong’s push to launch stablecoin rules as soon as possible this quarter has also attracted the interest of companies including the international unit of asset management company Harvest Funds, Harvest Global Harvest Global Investments Ltd., fintech specialist RD Technologies and crypto exchange-traded fund Venture Smart Financial Holdings Ltd. are in discussions with the Hong Kong Monetary Authority over a planned stablecoin trial, These experiments are called regulatory sandboxes.

Previously, according to Hong Kong Wen Wei Po, Hong Kong’s licensed virtual asset brokerage Victory Securities, its executive director Chen Peiquan said that the listing of spot ETFs allowed in the United States this time was regarded by the “currency circle” as virtual currency and actual transactions. Therefore, the key to achieving "connection" is bound to involve more investors.

Chen Peiquan pointed out that many investors have not dared to invest in virtual currencies. The main reasons include not adapting to new investment methods or worrying about something happening to the investment platform. Virtual currency spot ETFs allow investors to invest through channels they are familiar with. For virtual currency spot ETFs issued in Hong Kong, the China Securities Regulatory Commission will require them to use a Hong Kong licensed platform. The platform itself also has insurance. Not only is the investment risk Protection will also benefit the development of Hong Kong’s virtual currency platforms and securities companies.

Asia’s first Bitcoin spot ETF

On January 11, 2024, Hong Kong Legislative Council member Wu Jiezhuang tweeted: The Bitcoin spot ETF passed by the U.S. Securities and Exchange Commission (SEC) in the early morning is an important development for the virtual asset market, and it believes that Hong Kong should also have the courage to become a "leader" in the field of virtual assets and lead the entire industry through innovative policies development of. He made two main suggestions:

The SAR government should promote the implementation of spot ETFs as soon as possible:The Hong Kong Securities and Futures Commission has expressed its readiness to accept applications for spot Bitcoin ETFs. At a time when virtual assets are developing rapidly and competition is fierce, Hong Kong should be the first to implement relevant policies and products globally, especially in Asia, as soon as possible to consolidate its opportunities to become a global center for virtual assets.

Strengthen popular education on virtual assets:With the increase in global compliance virtual asset products and attention, the SAR government should immediately strengthen popular education. On the one hand, it improves citizens’ awareness of virtual assets, and on the other hand, it also reduces the opportunities for criminals to use virtual assets to commit fraud.

In this regard, Livio Weng, chief operating officer of HashKey Group, revealed in an exclusive interview with Caixin that about ten fund companies are currently preparing to launch virtual asset spot ETFs in Hong Kong, seven of which , eight companies are already in the actual advancement stage.

Previously, the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority issued a circular in December 2023, statingthat they were ready to accept applications for recognition of virtual asset spot ETFs.

This means that Hong Kong is becoming the first market in Asia to allow the listing of virtual asset spot ETFs.

It can be said that Bitcoin ETF is a fund listed and traded on a traditional stock exchange, which allows investors to trade at a lower price cost and risk, and participate in Bitcoin investment more conveniently and safely.

Bitcoin ETFs are mainly divided into two types: Bitcoin futures ETFs and Bitcoin spot ETFs. Bitcoin futures ETFs refer to funds that invest in Bitcoin futures contracts, while Bitcoin spot ETFs refer to funds that directly hold Bitcoin.

Globally, the development of Bitcoin ETFs is still in its infancy, and currently only a few countries and regions have approved the listing of Bitcoin ETFs. Among them, the United States and Hong Kong, as two important financial centers, have recently issued a series of regulatory policies on Bitcoin ETFs, which has attracted widespread market attention.

Hong Kong currently allows futures-based cryptocurrency ETFs, and there are currently three listed ones, namely CSOP Bitcoin Futures, CSOP Ether Futures and Samsung Bitcoin Futures.

Their total assets are relatively small, about $50 million. Samsung Asset Management said it would not rule out exploring the possibility of launching a spot ETF.

The United States has set the benchmark, and Hong Kong is closely following behind.

The United States is the world’s largest financial market and the largest demander for Bitcoin ETFs. However, the U.S. Securities and Exchange Commission (SEC) has always been cautious about Bitcoin ETFs, worried about the violent price fluctuations of Bitcoin, the possibility of market manipulation, investor protection and other issues. Since 2013, the SEC has rejected dozens of Bitcoin ETF applications, disappointing the market.

However, on January 10, 2024, the U.S. SEC finally announced that it had approved 11 Bitcoin spot ETFs and authorized these 11 ETFs to begin trading on Thursday (January 11) local time. This is the first time in the history of the U.S. SEC that a Bitcoin spot ETF has been approved, and it is also a major breakthrough for Bitcoin ETFs. It is considered an important symbol of the formalization, legalization and recognition of Bitcoin.

This approval by the US SEC is actually a rare compromise. The Bitcoin Spot ETF was proposed as early as 2013. For 10 years since then, the current SEC Chairman Gary Gensler and his predecessor Jay Clayton have refused to allow the launch of such products, citing the violent fluctuations in Bitcoin prices and concerns about investment. investor protection, the possibility of market manipulation, etc.

However, BlackRock unexpectedly filed a related application in June last year. In August last year, Grayscale Investments won a key lawsuit against the U.S. SEC. The judge of the Washington, D.C. Circuit Court of Appeals ruled in the ruling that the SEC approved the Bitcoin futures ETF and rejected Grayscale’s conversion of GBTC into spot Bitcoin. ETF decisions are "arbitrary and capricious."

The above cases triggered a surge in cryptocurrencies on speculation that the U.S. SEC would eventually have to compromise and give the green light to the growing calls for a spot Bitcoin ETF.

Hong Kong is also well prepared for the Bitcoin spot ETF competition.

The "Joint Circular on Virtual Asset-Related Activities of Intermediaries" issued by the Hong Kong Securities and Futures Commission and the Hong Kong Monetary AuthorityThe circular states that as the Securities and Futures Commission has Recognizing virtual asset futures ETFs and being ready to accept applications for authorization from other funds involving virtual assets, including virtual asset spot exchange-traded funds (virtual asset spot ETFs), the two regulatory agencies responded to the above-mentioned latest market developments. Policy updated. The updates clearly set out the requirements that intermediaries should apply when distributing virtual asset-related products, and set out the standards of conduct that intermediaries should meet when distributing virtual asset funds5 authorized by the SFC.

In addition, the Hong Kong Securities and Futures Commission also issued the "Circular on Securities and Futures Commission-authorized funds investing in virtual assets", which stipulates that funds must "directly invest in virtual assets that the public in Hong Kong can issue in the Securities and Futures Commission" The same spot virtual asset token traded on the branded Virtual Asset Trading Platform (VATP)." Cryptocurrency transactions conducted by such ETFs should be conducted through cryptocurrency platforms or authorized financial institutions licensed by the Securities and Futures Commission. The trustee or custodian of the fund can only delegate its cryptocurrency custody functions to a VATP licensed by the Securities and Futures Commission or in compliance with the regulations promulgated by the Monetary Authority. An institution with standards for cryptocurrency custody, the Securities and Futures Commission-approved spot cryptocurrency ETF allows subscription and redemption in physical and cash ways.

Written at the end

Judging from the current situation, the United States and Hong Kong are the two major investors in Bitcoin ETFs Main markets, they represent different positions and strategies of the West and the East respectively.

The United States is the world’s largest financial market and the largest demander for Bitcoin ETFs. However, its regulators have always been cautious and conservative about Bitcoin ETFs, and only recently approved 11 Bitcoin spot funds. The listing of ETF is a compromise and concession to market pressure.

Hong Kong is the most important financial center in Asia and the largest supplier of Bitcoin ETFs. Its regulatory agencies are relatively open and flexible. It has approved 3 Bitcoin futures ETFs and is ready to accept Bitcoin spot. The application for ETF is the first of its kind in Asia.

It can be said that the goal of Hong Kong’s Bitcoin ETF is to attract more retail investors and family office investors and enhance Bitcoin’s liquidity and credibility, but it may also increase Bitcoin’s Volatility and instability.

In short, the competition between the United States and Hong Kong in Bitcoin ETFs reflects the different perspectives and interests of the East and the West in the field of virtual assets, and also affects the future direction and development of Bitcoin. The launch and development of Bitcoin ETFs are both opportunities and challenges for Bitcoin, which require the joint attention and response of investors and regulators.