Bitcoin
Bitcoin (BTC) and Ether (ETH) ETFs Launch in Hong Kong on Tuesday: Interview with Top Execs
In addition to the higher initial capital, Zhu Haokang also noted the availability of in-kind subscriptions and redemptions, as well as regulatory clarity in Hong Kong that allowed for a spot ether ETF before another was available in the US. Also participating in the briefing was Wayne Huang, head of ETF and custody at cryptocurrency exchange OSL.
What does China Asset Management (Hong Kong) think about the scale of capital flows on the first day of Hong Kong’s cryptocurrency ETF listing tomorrow?
Zhu Haokang : I am very confident that the initial listing scale of the Hong Kong virtual asset spot ETF (more than US$125 million) can exceed the first day issuance scale of the United States. The issuance scale of the 10 US Bitcoin spot ETF issuers on the first day of January 10 this year was $125 million. Huaxia is confident that it will become the largest ETF issuer among the three issuers. Details will be revealed to everyone at 9:30 am tomorrow.
Wayne Huang : There will be an announcement from the Hong Kong Stock Exchange at 9:30 am tomorrow morning, but OSL has indeed completed its first day of fundraising on OSL today with two funds (including Huaxia and another fund that cooperates with us). Judging by the numbers, the transactions are indeed much larger than the US Bitcoin spot ETF’s capital inflow on its first day of trading.
What is the difference between the Spot China Bitcoin ETF and the Spot China Ethereum ETF and other ETFs?
Zhu Haokang : The first difference is that compared to the US spot Bitcoin ETF, we have both spot and physical subscriptions and redemptions, which the US spot Bitcoin ETF does not have.
In addition, there are two differences between ChinaAMC products and the other two: ChinaAMC Hong Kong Spot ETF is the only ETF with counters of Hong Kong dollars, US dollars and RMB. The second is that in addition to listed shares, we have unlisted shares. These two points are not available in the other two companies.
In addition to Hong Kong, where else have investors participated in the Hong Kong virtual asset spot ETF?
Zhu Haokang : Thanks to the physical signature method, first of all, investors include Bitcoin mines, etc. They can use their Bitcoin holdings to directly purchase virtual asset spot ETFs in Hong Kong. Secondly, in countries and regions that have not yet issued ETFs outside of Hong Kong, such as Singapore and the Middle East, we have also contacted a large number of investors who are extremely interested. In addition, although the current Bitcoin ETF spot market in the United States is very large, compared with the United States, Hong Kong uses cash and physical signatures and is open for trading during Asian trading hours, which will still attract many American investors . Finally, several family offices in Asia and abroad are also very interested in spot crypto ETFs.
Is there currently only one securities firm, Victory Securities, qualified to undertake material transactions in physical underwriting?
Wayne Huang : Not only Victory Securities can do physical underwriting, but also Huaying Securities with the support of OSL. Currently, there are three securities companies that can do physical underwriting, and there will be more follow-up later. Therefore, after the ETF is listed tomorrow, many exchanges will follow, and it is possible that more exchanges will participate in the entire virtual asset ETF ecosystem in May.
What are the specific operations for physical purchasing?
Wayne Huang : Physical signature is a pioneering initiative for Hong Kong ETFs that is different from US ETFs. First, the broker needs to update its #1 license to be able to handle virtual asset transactions. Investors can transfer their coins to OSL through this exchange and finally transfer their wealth back to OSL. Transfer to the fund’s custodial account and complete the entire physical subscription process.
What is OSL’s anti-money laundering process in physical signature? Is it acceptable for the counterparty to be the other exchange’s wallet?
Wayne Huang : First, investors must connect to OSL through a broker to open an account. We will perform a whitelist check of the wallet you are about to transfer money to prove that this wallet is maintained and controlled by the investor. Secondly, we will check the investment. The user’s private wallet must be checked to see if there are any suspicious transactions in the wallet’s last few dozen on-chain transactions. Only wallets that have passed whitelist verification can allow money transfer.
Can a wallet be another exchange’s wallet? In theory, this can be done. If the other exchange’s anti-money laundering rules are consistent with the OSL rules, we can accept the other party’s coin transfer, but we need the other exchange to provide certain customer information.
Can Hong Kong Cryptocurrency Spot ETFs Be Open to Mainland Investors? Or will there be a possibility of opening it to investors from the continent in the future?
Zhu Haokang : Currently, investors from mainland China are not allowed to invest in Hong Kong cryptocurrency spot ETFs. Qualified investors, institutional investors, retail investors and international investors from Hong Kong who meet regulations can invest in cryptocurrency spot ETFs. For details, you can consult brokers and sales channels and keep an eye out for corresponding regulatory adjustments or the introduction of a specific regulatory framework in the future.
Hong Kong’s Ethereum spot ETF is the world’s first, but if the United States finally rules that “Ethereum” is a security, will it affect Hong Kong’s Ethereum spot ETF?
Wayne Huang : Probably not, because the fact that the United States defines Ethereum as a security does not affect the independent decision-making of the Hong Kong Securities Regulatory Commission. The Hong Kong Securities Regulatory Commission has its own set of procedures for determining whether a given virtual asset is a security and whether it can be open to retail traders. It will not be affected by differing opinions among various US departments or, ultimately, by its own unilateral definition. to Hong Kong.
I also want to emphasize why Hong Kong could be the first in the world to launch an Ethereum spot ETF instead of the United States? The regulation of cryptocurrency in the United States causes several departments to speak out at the same time or attempt to regulate it. It has long been decided who should supervise cryptocurrencies in Hong Kong, namely the China Securities Regulatory Commission. The China Securities Regulatory Commission has provided some very clear regulatory frameworks. Hong Kong already had a clear definition of Ethereum. Ethereum It is not a security, but the first non-securities virtual asset to be included in Hong Kong’s supervision along with Bitcoin, and it is one of the two targets that can be provided to retail investors.
Will Hong Kong launch other virtual asset ETFs?
Wayne Huang : Only Bitcoin and Ethereum for now. We have repeatedly discussed with the China Securities Regulatory Commission the process of how to list currencies in compliance transactions in Hong Kong. Let me share briefly. First, we need the issuer of the virtual asset or ourselves to find a legal opinion that indicates whether the currency is a security or not. And transform the legal opinion and our due diligence on the currency into a detailed research report and submit it to the China Securities Regulatory Commission. After final approval from the China Securities Regulatory Commission, it will initially be open to professional investors. When a certain level of liquidity is reached, it will be included. After a period of time within an index, we may ask the Securities and Exchange Commission to update the currency to be traded by retail investors.
But so far, after 4 years of operation, OSL still only has two assets, Bitcoin and Ethereum, open for trading by retail investors. In other words, for now, only these two currencies meet the conditions for launching ETFs. , but we have discussed and studied with the China Securities Regulatory Commission.
Will you consider launching ETFs as inverse leverage of virtual assets?
Zhu Haokang : The ETF itself is full of financial attributes, which involve the innovation of many financial products. We have also seen some international investment banks make some financial innovations and develop similar derivatives on existing US products. We are also paying close attention to and communicating with a large number of investment banks and securities firms. To give a simple example, the Hong Kong Stock Exchange also allows ETFs to be sold short and even traded on margin. We are also communicating with our partners to create more income and more innovation in financial products for our ETF investors. .
How do you think the next cryptocurrency ETF will affect the price of cryptocurrency?
Zhu Haokang : Based on the analysis of various factors, we believe that cryptocurrency ETFs will be beneficial to cryptocurrency prices. First, the Hong Kong cryptocurrency spot ETF market injects more liquidity into the cryptocurrency market. Second, accelerate industry compliance. Third, financing channels have been expanded. Fourth, investors can obtain arbitrage opportunities between ETF prices and spot prices, allowing more market makers and arbitrage investors to actively participate. Fifth, with the approval of our spot crypto ETF, trading factors in traditional markets will also directly affect the cryptocurrency market. Sixth point, we believe that Hong Kong’s regulatory framework is relatively clear, and the issuance of Bitcoin and Ethereum ETF products provides great convenience. Seventh point, we believe that Hong Kong, as an international financial center, will attract more Chinese investors to trade during Asian periods, improve market liquidity and perform better than similar products in Europe or Canada.
Huaxia’s fees are higher than those of the other two Hong Kong companies. Are you worried about the lack of competitiveness?
Zhu Haokang : I think everyone is more concerned about the issue of fees. Firstly, China Asset Management Hong Kong’s fee structure fully follows the standards of thematic and complex ETFs listed in Hong Kong. You can look at previously listed cryptocurrencies, futures ETFs, and various thematic ETFs. Charges. Our charges are lower than similar charges. Secondly, our products provide very high flexibility in trading options, not only supporting listed and unlisted stocks, but also supporting three types of over-the-counter transactions in US dollars, Hong Kong dollars and RMB. This is our unique advantage. Thirdly, the complexity and innovation of our products determine the importance of our risk management and operational stability.