Hong Kong’s financial market is set to face competition in fees as newly approved Bitcoin and Ethereum exchange-traded products (ETFs) enter the scene. These ETFs, which have received licensing from the SFC and are scheduled to commence trading on April 30, 2024, include three funds managed by China AMC, Harvest Global Investments, and a joint venture between Bosera and HashKey Capital. All of these funds will be held by the Bank of China International-Prudential Trustee Limited (BOCI-Prudential) as custodian and aim to mirror the performance of Bitcoin and Ethereum, relying on the CME CF Bitcoin Reference Rate and the CME CF Ether-Dollar Reference Rate, respectively.
The ETFs have been priced differently based on their management fee structures, with the intention of attracting investors from various market segments. China AMC has announced a management fee of 0.99%, while Bosera and HashKey charge a fee of 0.6%. Harvest Global Investments stands out by offering a six-month fee waiver, followed by a fee of only 0.3%, which is significantly lower than that of other fund managers. This could ignite fierce competition among issuers vying for a substantial share of Hong Kong’s emerging digital asset market.
James Seyffart, an analyst at Bloomberg Intelligence, has highlighted the possibility of price competition within the industry. He has emphasized the impact that Harvest’s aggressive pricing strategy could have on the pricing norms of digital assets in Hong Kong. These financial products are the first of their kind to be introduced in the neighboring Asian market, which is open to innovative financial offerings.
Zhu, the Head of Digital Assets and Family Office Business at China AMC, has emphasized that these ETFs provide a secure and efficient investment channel for both retail and institutional clients. They enable the community to engage with virtual assets within a regulated environment. Zhu has also highlighted the “in-kind” nature of these ETFs, which allows coin holders to easily convert their assets into regulated ETFs.
These products also align with Hong Kong’s overall goal of establishing a thriving web3 network. The launch of these ETFs is expected to drive the development of new strategies in the digital asset management space and establish benchmarks for the performance of popular cryptocurrencies in regulated investment formats.