Hong Kong Financial Services Firm Plans Bitcoin ETF Amid City’s Push for Digital Asset Hub

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Venture Smart Financial Holdings Ltd., a Hong Kong-based financial services company, is set to initiate the launch of an exchange-traded fund (ETF) focused on direct Bitcoin investment within the current quarter. This move aligns with Hong Kong’s ongoing endeavors to establish itself as a prominent digital asset hub.

The company, also known as VSFG, has outlined its intention to submit an application to the Securities and Futures Commission (SFC) for the ETF. This development follows the issuance of guidelines by the regulator last month, marking the initial steps toward spot crypto fund approvals.

Brian Chan, Group Head of Investment and Product at VSFG, expressed optimism about the substantial potential of the market, citing a goal to achieve $500 million in assets under management by the end of this year.

Spot crypto ETFs have garnered significant attention, particularly with the recent launch of Bitcoin funds in the US by major issuers like BlackRock Inc. and Fidelity Investments. Despite Bitcoin’s impressive performance last year, experiencing more than a twofold increase, its value has dipped around 10% since the commencement of trading for these vehicles on January 11.

In Hong Kong, existing provisions allow for futures-based crypto ETFs, with three such offerings currently listed: CSOP Bitcoin Futures, CSOP Ether Futures, and Samsung Bitcoin Futures, collectively holding approximately $50 million in assets.

Samsung Asset Management has not ruled out exploring the launch of a spot ETF, while CSOP Asset Management has not provided commentary on the matter.

The SFC, deferring to the guidelines issued in December, refrained from further comment. The approval process for these products, drawing parallels from traditional ETFs, may take several weeks to months.

VSFG, recognized as one of Hong Kong’s initial SFC-approved virtual asset managers, offers a spectrum of traditional and digital wealth management services.

Aegis Custody, a digital asset custodian, is engaged in discussions with four asset managers regarding the potential listing of spot crypto products in Hong Kong. The CEO, Serra Wei, anticipates that the city’s regulatory requirements may lead to higher fees compared to the low management levies observed in numerous new US spot Bitcoin ETFs.

Hong Kong, bolstering its reputation as a forward-thinking financial center, implemented a dedicated virtual asset regulatory framework in June. Designed to attract companies while prioritizing investor protection, the rules permit retail investors to engage in trading major tokens such as Bitcoin and Ether on licensed exchanges.

While Hong Kong stands as a local market and conduit to Chinese wealth, questions linger regarding the extent of crypto activity the city can effectively support. Bloomberg Intelligence ETF analyst Rebecca Sin suggests that CSOP Asset Management could take the lead in the Asia Pacific for spot digital-asset ETFs, given their substantial presence in the current futures-based offerings in Hong Kong. The initiation of Bitcoin ETFs in the US has prompted attention in several Asian jurisdictions, including South Korea, where the presidential office has urged regulatory caution amid concerns about potential legal violations by brokers facilitating the trade of spot Bitcoin ETFs.