Huaxia Fund Hong Kong launches Bitcoin Ether ETF, Hong Kong digital asset regulatory framework takes shape.

Recently, the Bitcoin and Ether ETFs launched by Huaxia Fund in Hong Kong received regulatory approval and will be listed on the Hong Kong Stock Exchange at the end of April. This marks Hong Kong as another region, following the United States, to approve such products. Ordinary investors will also be able to participate in digital asset-related investments by subscribing to these ETFs.

China Universal Asset Management's Hong Kong subsidiary has added a digital asset management business to its existing operations, becoming the first approved branch of a leading domestic fund company in Hong Kong for this type of business. Through an interview with the head of digital asset management at the company, Zhu Haokang, we can learn about the latest developments in the digital asset sector in Hong Kong.

Zhu Haokang stated that since the Hong Kong government released relevant policies in October 2022, Hong Kong has been striving to become a global Web 3.0 center. In March of this year, the Hong Kong Monetary Authority launched several innovative projects related to central bank digital currencies, stablecoins, and more. The upcoming Bitcoin and Ether spot ETFs reflect the Hong Kong government's support for the compliant development of the cryptocurrency industry. Huaxia Hong Kong is actively researching the digital asset field, with a particular focus on innovative products such as the securitization of physical assets and cryptocurrency ETFs, and is participating in the Monetary Authority's experimental projects. He believes that as Web 3.0 technology gains recognition in financial innovation, digital assets are becoming increasingly important, and the potential for future development in Hong Kong's digital asset industry is enormous.

In terms of regulation, Hong Kong has adopted a different approach from the United States. Hong Kong allows cash and physical subscriptions, where participants can directly subscribe or redeem ETF shares using Bitcoin or Ether, while the United States only allows cash transactions. Although the U.S. market is currently larger, Hong Kong, as one of the first regions to approve Ethereum ETFs and allow retail participation, may have a greater advantage.

The Hong Kong Securities and Futures Commission has established a strict regulatory framework for cryptocurrency asset funds. Fund management companies must have a good regulatory record and can only invest in cryptocurrency assets listed on licensed trading platforms, with the use of leverage prohibited. Regarding custody, it can only be entrusted to licensed institutions or those that meet the standards of the Monetary Authority.

To prevent money laundering and other illegal activities, Hong Kong has implemented strict anti-money laundering, know your customer, and know your token standards. These regulations impose strict obligations on all market participants to prevent illegal financial activities. In contrast, the regulation of cryptocurrency exchanges and custodians in the United States is still not well-developed.

Currently, qualified investors, institutional investors, retail investors, and eligible international investors in Hong Kong can invest in cryptocurrency ETFs. Mainland investors are temporarily unable to participate, and specific qualification requirements can be consulted with relevant institutions, as well as keeping an eye on possible regulatory adjustments in the future.

For digital asset investment, Zhu Haokang proposed the "3D Theory", which stands for Defense, Diversification, and Decision-making. He pointed out that Bitcoin, as a decentralized digital currency, performed well during financial crises and can serve as a tool to hedge traditional financial risks. In the long term, Bitcoin has a low correlation with traditional assets, aiding in portfolio diversification. Although there are significant short-term fluctuations, in the long run, the investment return of Bitcoin far exceeds that of other major asset classes.

Huaxia Fund, as the largest ETF issuer in China, has extensive experience in the asset management field. As of the end of March 2024, its managed scale exceeds 2.15 trillion yuan, capturing more than 22% of the Chinese ETF market. Over the 16 years since the establishment of its Hong Kong subsidiary, Huaxia Fund has won more than 90 industry awards and manages several of the largest ETF products globally or in Hong Kong.

Zhu Haokang stated that Huaxia Fund Hong Kong has significant advantages in ETF management, particularly in managing key metrics such as liquidity, tracking error, premium and discount, and bid-ask spreads. They are confident in their management capabilities and believe they can meet market expectations.