In addition to the higher seed money, Zhu Haokang also took note of the availability of in-kind subscriptions and redemptions as well as the regulatory clarity in Hong Kong that allowed a spot ether ETF before one was available in the U.S. Also participating in the briefing was Wayne Huang, head of ETF and custody at crypto exchange OSL.
What does China Asset Management (Hong Kong) think about the scale of capital inflows on the first day of listing of Hong Kong cryptocurrency ETFs tomorrow?
Zhu Haokang : I am very confident that the initial listing scale of Hong Kong’s virtual asset spot ETF (more than US$125 million) can exceed the issuance scale on the first day 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. The details will be revealed to everyone at 9:30 tomorrow morning.
Wayne Huang : There will be an announcement from the Hong Kong Stock Exchange at 9:30 tomorrow morning, but OSL has indeed completed its first day of raising funds on OSL today with two funds (including Huaxia and another fund that cooperates with us). Judging from the numbers, the transactions are indeed far greater than the capital inflow of the U.S. Bitcoin spot ETF on its first day of trading.
What is the difference between Spot China Bitcoin ETF and Spot China Ethereum ETF and other ETFs?
Zhu Haokang : The first difference is that compared with the US spot Bitcoin ETF, we have spot and physical subscriptions and redemptions, which the US spot Bitcoin ETF does not have.
In addition, there are two differences between ChinaAMC’s products and the other two: ChinaAMC’s Hong Kong spot ETF is the only ETF with Hong Kong dollar, US dollar and RMB counters. 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 subscription 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 come into contact with a large number of investors who are extremely interested. In addition, although the current spot Bitcoin ETF market in the United States is very large, compared with the United States, Hong Kong uses cash and physical subscriptions and is open for trading during Asian trading hours, which will still attract many American investors. Finally, several family offices in Asia and overseas are also very interested in spot crypto ETFs.
Is there currently only one securities firm, Victory Securities, qualified to conduct relevant transactions in physical subscriptions?
Wayne Huang : Not only Victory Securities can do physical subscription, but also Huaying Securities with the support of OSL. Currently, there are three securities firms that can do physical subscription, and there will be more follow-up later. Therefore, after the ETF is listed tomorrow, many brokers will follow up, and it is possible that more brokers will participate in the entire ecosystem of virtual asset ETFs in May.
What are the specific operations for physical purchase?
Wayne Huang : Physical subscription is a pioneering initiative for Hong Kong ETFs that is different from US ETFs. First, the brokerage firm needs to upgrade its No. 1 license to be able to handle virtual asset transactions. Investors can transfer their coins to OSL through this brokerage firm, and then finally transfer their equity back to OSL. Transfer it to the fund’s custody account and complete the entire process of physical subscription.
What is OSL’s anti-money laundering process in physical subscription? Is it acceptable for the counterparty to be the wallet of the other exchange?
Wayne Huang : First, investors must connect to OSL through a brokerage firm to open an account. We will perform a whitelist verification on the wallet that is about to transfer money to prove that this wallet is held and controlled by the investor. Second, we will verify the investment. The user’s private wallet must be screened to see if there are any suspicious transactions in the wallet’s past dozens of transactions on the chain. Only wallets that have passed the whitelist verification can allow him to transfer money.
Can a wallet be the wallet of another exchange? In theory, this can be done. If the anti-money laundering rules of the other exchange are consistent with the OSL rules, we can accept the other party’s transfer of coins, but we need the other exchange to provide certain customer information.
Can Hong Kong’s cryptocurrency spot ETFs be open to mainland investors? Or will there be a possibility of opening it up to mainland investors in the future?
Zhu Haokang : Currently, mainland Chinese investors are not allowed to invest in Hong Kong’s cryptocurrency spot ETFs. Hong Kong’s qualified investors, institutional investors, retail investors, and international investors that meet the regulations can all invest in cryptocurrency spot ETFs. For details, you can consult brokers and sales channels, and continue to pay attention to whether there are corresponding regulatory adjustments or the introduction of a specific regulatory framework in the future.
Hong Kong’s Ethereum spot ETF is the first in the world, but if the United States finally determines that “Ethereum” is a security, will it affect Hong Kong’s Ethereum spot ETF?
Wayne Huang : Probably not, because whether 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 certain virtual asset is a security and whether it can be opened to retail traders. It will not be affected by different opinions between various departments in the United States, or ultimately their own unilateral definition. to Hong Kong.
I also want to emphasize why Hong Kong can be the first in the world to launch an Ethereum spot ETF, rather than the United States? The regulation of cryptocurrency in the United States has multiple departments speaking out at the same time, or trying to regulate it. Who should supervise cryptocurrencies in Hong Kong has long been decided, namely the China Securities Regulatory Commission. The China Securities Regulatory Commission has given some very clear regulatory frameworks. Hong Kong has 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 supervision together 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 coins 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 stating whether the coin is a security or a non-security. And turn 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 by the China Securities Regulatory Commission, it will be first opened to professional investors. When a certain level of liquidity is reached, it will be included. After a period of time within the scope of an index, we can apply to the Securities Regulatory Commission to upgrade the currency to be traded by retail investors.
But so far, after 4 years of operation, OSL still has only two assets, Bitcoin and Ethereum, open to retail investors for trading. That is to say, for the time being, only these two coins meet the conditions for launching ETFs. , but we have been discussing and studying with the China Securities Regulatory Commission.
Will you consider launching ETFs such as inverse leverage of virtual assets?
Zhu Haokang : 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 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 short-selling and even margin trading. 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, Hong Kong’s crypto spot ETF market injects more liquidity into the crypto market. Second, accelerate the compliance of the industry. Third, funding channels have been expanded. Fourth, investors may obtain arbitrage opportunities between ETF prices and spot prices, allowing more market makers and arbitrage investors to actively participate. Fifth, with the passage of our crypto spot 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 time periods, improve market liquidity, and perform better than similar products in Europe or Canada.
Huaxia’s rates are higher than those of the other two Hong Kong companies. Are you worried about lack of competitiveness?
Zhu Haokang : I think everyone is more concerned about the fee issue. First of all, the fee structure of China Asset Management Hong Kong fully follows the standards of thematic and complex ETFs listed in Hong Kong. You can refer to the past listed cryptocurrency, futures ETFs and various thematic ETFs. Charges. Our charges are lower than similar charges. Second, our products provide very high flexibility in trading options, not only supporting listed and unlisted shares, 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.
