Revealed: Hong Kong ETF Structures for Bitcoin and Ether Launch

Hong Kong’s regulator has approved the launch of spot Bitcoin and Ether exchange-traded funds (ETFs), which will differ significantly from their counterparts in the US. The ETFs, managed by ChinaAMC, will track the performance of the Chicago Mercantile Exchange’s crypto indexes and allow redemptions in both fiat money and crypto funds. The ETFs will be denominated in three currencies: the US dollar, Hong Kong dollar, and Chinese yuan. BOCI-Prudential and OSL will act as custodians for the ETFs and will also custody spot Bitcoin and Ether ETF assets for issuer Harvest Global. Hong Kong-based HashKey Capital will partner with Bosera Asset Management to launch their own spot Bitcoin and Ether ETFs.

According to Harvest Global, BOCI and OSL’s involvement will help accurately reflect the real-time value of Bitcoin and Ethereum and address issues such as excessive margin requirements and price premiums caused by missing short positions. They will also mitigate roll losses. The approval of the ETFs and the introduction of a currency-holding subscription mechanism are expected to further promote the development of the virtual asset market in Hong Kong and attract more capital inflows.

Management fees for Hong Kong Bitcoin ETFs will range from 0.3% to 0.99%, which is higher than fees charged by some US issuers, which are less than 0.25% per annum. Bloomberg analyst James Seyffart commented that this price difference could lead to a fee war in Hong Kong.

All three ETF issuers will create and redeem ETF shares on Hong Kong’s regulated crypto exchanges, OSL and HashKey. Investors will have until 11 am to redeem their shares for cash or until 4 pm for crypto withdrawals. BOCI Prudential will serve as custodian for all issuers, and market makers include Vivienne Court, Virtu Financial, and others.

One thought on “Revealed: Hong Kong ETF Structures for Bitcoin and Ether Launch

  1. Kudos to Harvest Global, BOCI, OSL, and other partners for making this happen! The launch of ETFs denominated in three currencies will definitely attract diverse investors.

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