Which Hong Kong cryptocurrency ETF is the best? A detailed analysis of the differences and similarities of the issuance

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Which Hong Kong cryptocurrency ETF is the best? A detailed analysis of the differences and similarities of the issuance

Bitcoin and Ethereum spot ETFs approved for listing in Hong Kong

On Wednesday, April 23, the Hong Kong market ushered in a major milestone in the field of virtual assets. Three asset management companies: China Asset Management, Harvest Fund, and Bosera Asset Management were successfully approved to issue Bitcoin and Ethereum spot ETF products in Hong Kong. What is Bitcoin/Ethereum spot ETF: ⎡ It is an exchange-traded fund (a highly liquid fund that trades during the trading day like stocks) that mainly anchors and tracks the price of Bitcoin by holding a large amount of cryptocurrency spot. Similar to the gold spot ETF ⎦.

Which Hong Kong cryptocurrency ETF is the best? A detailed analysis of the differences and similarities of the issuance

This type of product debuted in the Asian market with the goal of providing investors with investment returns that are closely related to the spot prices of Bitcoin and Ethereum. Virtual asset spot ETFs simplify the investment process and reduce the difficulty of entry. Professional fund management brings standardized investment operations and risk control systems. Investors can trade these ETF products on major securities trading platforms, which not only reduces the complexity of operations but also reduces risks. In addition, this type of ETF product supports physical subscription and redemption, allowing investors to indirectly own Bitcoin by holding ETF shares without worrying about the preservation of private keys and asset security.

Currently, these ETF products support cash or Bitcoin subscription, but the operation must open a corresponding account in Hong Kong. According to Caixin, in accordance with the joint notice issued by the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority in December 2023, both the existing virtual asset futures ETFs and the future spot ETFs shall not be provided to retail investors in mainland China and other regions where the sale of virtual asset products is restricted. However, even if they are not permanent residents of Hong Kong, mainland residents holding Hong Kong identity cards have the opportunity to participate in the trading of these ETF products, provided that they comply with relevant laws and regulations.

Details of the virtual asset ETFs of three asset management companies

What are the differences in details between the cryptocurrency ETFs issued by the three institutions? Which one should investors choose to buy and trade? We have cited the information provided by a Hong Kong financial institution and have sorted it out in detail so that investors can choose according to their own circumstances.

Which Hong Kong cryptocurrency ETF is the best? A detailed analysis of the differences and similarities of the issuance

Listing date and issue price:

All three companies ETF products were listed on the same day, April 30, 2024. In terms of the initial offering price, China Asset Management and Harvest Fund both opened at $1, while Bosera Fund was priced based on 0.0001 of the CME CF Bitcoin Index price at 4 pm Hong Kong time on April 26.

Share trading and subscription requirements:

In terms of the number of shares per transaction, China Asset Management and Harvest Fund set a threshold of 100 shares, while Bosera Fund set it at 10. As for the number of shares to be subscribed, China Asset Management and Bosera Fund set a minimum requirement of 10,000 shares, while Harvest Fund set a higher requirement of at least 50,000 shares.

Add or redeem policy:

All three companies support investors to create or redeem ETF shares through cash or in-kind, which provides investors with flexibility.

Transaction Currency and Management Fees:

China Asset Management supports trading in three currencies: USD, HKD and RMB, while Harvest Fund and Boshi Fund support USD and HKD. In terms of management fees, China Asset Management charges 0.99%, Harvest Fund does not charge management fees in the first six months, and then 0.3%, while Boshi Fund does not charge management fees in the first four months, and then 0.6%.

Selected Indices and Custodians:

The ETF products of the three companies all chose the CME CF Bitcoin Index as the tracking target to ensure that the performance of the products can closely follow the actual dynamics of the Bitcoin market. In terms of custodians, BOCI Prudential Trustee was selected as the custodian of these ETFs, responsible for safekeeping assets and supervising fund operations. In terms of the choice of secondary custodians, China Asset Management and Harvest Fund chose OSL Digital Securities Co., Ltd., while Bosera Fund chose Hash Blockchain. This choice reflects the different preferences of each company for asset custody and risk management.

The CME CF Bitcoin Index is a specific index that reflects the weighted average price of Bitcoin on different exchanges. The Bitcoin and Ethereum spot ETFs mentioned here choose to track the CME CF Bitcoin Index, which means that these ETFs aim to replicate the performance of the index as accurately as possible, providing investors with investment returns similar to buying actual Bitcoin, but in a more convenient and regulated way.

The above-mentioned sub-custodian is usually another financial institution entrusted by the custodian to provide custody services in a specific region or for a specific type of assets. Sometimes, due to legal, market practices or operational efficiency reasons, a professional sub-custodian is needed to handle certain specific custody functions. The main purpose of the primary and secondary division is to manage efficiency and risk diversification, ensure the security of fund assets and adapt to the needs of different markets.

Trading platforms, market makers and participating securities dealers:

In terms of virtual asset trading platforms, China Asset Management and Harvest Fund both chose OSL Exchange, while Bosera Fund chose HashKey Exchange. In terms of market makers, China Asset Management chose Vivienne Court Trading, while Harvest Fund chose China Merchants Securities (Hong Kong), CITIC CLSA Securities and Virtu Financial Singapore. The market maker of Bosera Fund has not yet been disclosed. As a key role in the circulation of ETF products, China Asset Management and Harvest Fund chose institutions including Victory Securities, Mirae Asset Securities (Hong Kong), Huaying Oriental (Asia) Holdings, Aide Securities and Huasheng Capital Securities. Harvest Fund also chose China Merchants Securities (Hong Kong).

Authorized Participants (APs) are usually large financial institutions that work with ETF issuers to manage the subscription and redemption process of ETFs. Authorized Participants can provide a basket of stocks or other assets to ETFs in exchange for newly issued ETF shares, or redeem ETF shares for assets held by the fund. This process helps ensure that the market price of the ETF is close to its net asset value (NAV) and helps provide liquidity and market efficiency.

The role of the auditing agency:

Finally, to ensure the financial transparency and compliance of the ETFs, China Asset Management and Harvest Fund Management selected PwC as auditors, while Bosera Fund Management selected Ernst Young. Through the independent audit process, auditors ensure the accuracy and authenticity of the ETFs financial reports.

An auditor is an independent third party that audits the ETFs financial statements to ensure they are fair, accurate, and in compliance with accounting standards. Auditors can detect and prevent errors and fraud in financial reporting through audits, providing investors with confidence in the ETFs financial condition. In some jurisdictions, the auditors audit report is a statutory requirement for disclosing ETF financial information to regulators and the public.

Which Hong Kong cryptocurrency ETF is the best? A detailed analysis of the differences and similarities of the issuance

Bloomberg News compiled the asset management scale of three companies

Asset management scale and number of ETFs issued:

According to Bloomberg Intelligence, China Asset Management has $55.7 billion in assets under management in mainland China and has issued 84 ETFs in the region, while in Hong Kong, China Asset Management has $3.6 billion in assets under management and has issued 15 ETFs. Harvest Fund has $10.3 billion in assets under management in mainland China and has issued 42 ETFs, while in Hong Kong, it has $16 million in assets under management and has issued four ETFs. Bosera Fund has slightly higher assets under management than Harvest Fund in mainland China, at $10.7 billion, and has issued 43 ETFs, while in Hong Kong, it has $40 million in assets under management and has issued six ETFs.

With the increasing popularity of virtual assets, these ETF products in Hong Kong provide new opportunities for global investors, while also demonstrating Hong Kongs competitiveness as an international financial center in innovative financial products. For investors interested in investing in Bitcoin and Ethereum, these ETF products undoubtedly provide an option worthy of attention.

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