After the approval of Bitcoin spot ETF in the United States this month, the launch of the first virtual asset spot ETF in Asia has also attracted attention. VSFG, a Hong Kong financial services company, announced today that it is preparing to submit an application to the Hong Kong Securities and Futures Commission (SFC) to seek approval for the launch of a Bitcoin spot ETF in the first quarter of this year. OSL, a licensed virtual asset exchange in Hong Kong, expects that the first virtual asset spot ETF will be launched by the middle of this year.
Currently, there are three virtual asset futures ETFs listed in Hong Kong, namely the Samsung Bitcoin Futures Active ETF, the CSOP Source Bitcoin Futures ETF, and the CSOP Source Ethereum Futures ETF. The Hong Kong SFC expressed its readiness to accept authorization applications for virtual asset spot ETFs and related funds in December last year.
According to a report by Hong Kong Economic Times, although no spot ETFs have been approved in Hong Kong yet, issuers are actively preparing. VSFG has revealed that it has reached a cooperation agreement with a Hong Kong fund company and is preparing to submit an application for a Bitcoin spot ETF, hoping to officially submit it before the Lunar New Year and launch it in the first quarter. The company initially hopes to achieve an asset management scale of $500 million by the end of this year.
Zhu Chengyu, Chairman of VSFG, mentioned that listing in Hong Kong can target the Asian time zone. Although ETFs are products open to retail investors, VSFG also negotiated with different institutional investors last year, including those allowed to participate within mainland China. There is a lot of demand in the entire Asian time zone, including South Korea, Japan, and Taiwan, and it is believed that fund companies will be interested in issuing ETFs one after another.
According to a circular issued by the Hong Kong SFC in December last year, recognized virtual asset fund custodians are limited to virtual asset trading platforms licensed by the SFC or banks that comply with the virtual asset custodian standards issued by the Hong Kong Monetary Authority. The Monetary Authority has completed industry consultations on the guidelines for providing virtual asset custodian services and is currently reviewing feedback before proceeding to the next step. Currently, only licensed local virtual asset exchanges in Hong Kong can provide custodian services.
HashKey Group’s Chief Operating Officer, Raymond Ng, expressed that currently, there are more than 10 fund companies actively preparing to launch spot ETFs in Hong Kong, and 7 to 8 of them have entered the actual promotion stage. Multiple Hong Kong spot ETF applications have also entered the actual promotion and cooperation stage with HashKey. They are striving to expedite the landing of Hong Kong spot ETFs within the next few months.
HashKey pointed out that these funds may first need to choose licensed exchanges for custody of underlying assets, as well as trading and clearing services. HashKey may also launch a shared regulatory agreement to assist fund operators.
Derek Chow, Executive Director and Head of Regulatory Affairs at OSL, another licensed virtual asset exchange in Hong Kong, stated that OSL is in close communication with many fund companies. There are 5 to 10 fund companies conducting research, and within 5, they can progress faster. It is expected that the first spot ETF will be launched by the middle of this year.
It is worth noting that there are currently only two licensed virtual asset trading platforms in Hong Kong. Derek Chow admitted that there is pressure to ensure that the fees for ETFs are not too high because the United States already has objective references, and the Hong Kong market is extremely transparent.
As an issuer of virtual currency futures ETFs, Samsung Asset Management (Hong Kong) ETF Investment Strategist, Selina Siu, pointed out that the company already has futures-related products and is interested in spot products as well. However, there are currently no updates, and many banks have not distributed virtual asset futures ETFs. Even if spot ETFs are launched, they may still face related issues.
Wong Cheuk Fung, Head of Sales (Asia Pacific) at CSOP Asset Management, another issuer of virtual currency futures ETFs, stated that futures ETFs are simpler to operate and can eliminate systemic risks, while spot ETFs involve higher risks related to custody, counterparty, and reliance on trading. Currently, launching another similar product may not be cost-effective, and market demand will be observed before considering it.