Hong Kong approves the first batch of Crypto Assets ETFs, and Hua Xia Fund actively布局 the digital asset market.

After the United States approved the Bitcoin Spot ETF in January this year, Hong Kong also approved its first batch of Crypto Assets ETFs at the end of April. Huaxia Fund (Hong Kong) announced that its Bitcoin ETF and Ether ETF will be issued on April 29 and listed on the Hong Kong Stock Exchange the next day. This marks Hong Kong as the second major financial center in the world, after the United States, to approve such products, and it also means that ordinary investors can participate in digital asset investment through ETFs.

Huaxia Fund (Hong Kong) has added digital asset management services on the basis of its traditional asset management business, becoming the first Chinese leading fund company's Hong Kong subsidiary to obtain approval for such products. The author interviewed Zhu Haokang, the head of digital asset management and family wealth management at the company, to learn about the latest developments in the digital asset sector in Hong Kong.

Zhu Haokang stated that since the Hong Kong government released its digital asset development policy declaration in October 2022, Hong Kong has been striving to become a global Web 3.0 hub. In March of this year, the Hong Kong Monetary Authority also launched three innovative sandbox projects involving central bank digital currency, stablecoins, and the second phase of the digital Hong Kong dollar pilot program. The upcoming Bitcoin and Ether Spot ETFs reflect the Hong Kong government's strong support for the compliant development of the crypto assets ecosystem.

Huaxia Hong Kong actively embraces this trend, organizing teams to conduct in-depth research in the Crypto Assets industry, with a particular focus on innovative products such as physical asset tokenization and cryptocurrency Spot ETFs, and actively participating in the regulatory sandbox project of the Monetary Authority. Zhu Haokang believes that as Web3.0 technology gains more recognition in the field of financial innovation, digital assets have become an indispensable part of the market, and Hong Kong's digital asset industry has enormous development potential.

Compared to the United States, Hong Kong's regulation of Crypto Assets ETFs has significant differences and advantages. Hong Kong allows cash and physical subscriptions, and participating traders can directly subscribe to or redeem ETF shares using Bitcoin or Ether, while the U.S. only allows cash transactions. Although the current Spot Bitcoin ETF market in the U.S. is larger, Hong Kong, as one of the first regions to approve Spot Ether ETFs and allow retail participation, may be more advantageous.

The Hong Kong Securities and Futures Commission has established a strict regulatory framework for digital asset funds. Fund management companies must have a good regulatory record and can only invest in digital assets listed on crypto asset trading platforms licensed by the Hong Kong Securities and Futures Commission. Funds are prohibited from using leverage, and there are strict regulations regarding custody. These measures are aimed at protecting the interests of investors.

Hong Kong's regulatory framework emphasizes strict compliance with standards such as anti-money laundering, know your customer, and know your token. This includes secure asset storage, detailed KYC/KYT procedures, anti-money laundering regulations, and counter-terrorism financing measures. These regulations impose strict obligations on all market participants to prevent illegal financial activities. In contrast, the regulation of crypto assets trading platforms 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 crypto assets ETFs. Investors from mainland China are temporarily unable to invest in Hong Kong's crypto assets ETFs. Specific investment qualifications can be consulted with brokers and sales channels, and attention should be paid to potential regulatory adjustments in the future.

When it comes to digital asset investment, Zhu Haokang proposed the "3D Theory of Digital Assets", which stands for Defensive (risk defense), Diversification (portfolio diversification), and Decision (investment decision-making). Taking Bitcoin as an example, it has shown good hedging capabilities during events such as financial crises and bank failures. The low correlation of Bitcoin with traditional assets makes it an excellent tool for portfolio diversification. In the long term, the investment return of Bitcoin far exceeds that of other major asset classes.

However, Zhu Haokang also reminds investors to be aware of the risks of investing in digital assets, including concentration risk, industry risk, speculative risk, and extreme price volatility risk. Investors should make decisions based on their own investment objectives and risk tolerance.

China Asset Management Co., as the largest ETF issuer in China, has 26 years of experience in the asset management field. As of the end of March 2024, its managed scale exceeds 2.15 trillion yuan, ranking first in China for 18 consecutive years. China Asset Management (Hong Kong), as its wholly-owned subsidiary, manages several of the largest global or Hong Kong ETF products in the Hong Kong ETF market.

Zhu Haokang is full of confidence in the team strength and management experience of Huaxia Fund (Hong Kong), believing that the company has the ability to manage such complex and innovative products well. He also pointed out that the Bitcoin Spot ETF of the largest asset management company in the United States has grown in scale by about 1700 times in three months, demonstrating the enormous potential for traditional investors to enter the digital asset field, and highlighting Hong Kong's competitive advantage in the global digital asset arena.