Huaxia Fund's Hong Kong subsidiary has been approved for Bitcoin and Ether ETFs, set to be listed on the Hong Kong Stock Exchange at the end of April.

Recently, Huaxia Fund (Hong Kong) announced that its Bitcoin ETF and Ether ETF have been approved by the Hong Kong Securities and Futures Commission, with plans for issuance on April 29, 2024, and listing on the Hong Kong Stock Exchange on April 30. This marks Hong Kong as another region in the world, following the United States, to approve such products. This move allows ordinary investors to participate in digital asset-related investments through the subscription of ETFs.

China Asset Management (Hong Kong) has added digital asset management services to its existing business, becoming the first institution among leading fund companies' Hong Kong subsidiaries to receive such approval. Through an interview with Zhu Haokang, the head of digital asset management and family wealth management at the company, we can gain insights into the latest developments in the digital asset space in Hong Kong.

Zhu Haokang stated that since the Hong Kong government issued relevant policy declarations in October 2022, Hong Kong has been actively promoting itself as a global Web 3.0 hub. In March this year, the Hong Kong Monetary Authority launched three innovative sandbox projects, involving wholesale central bank digital currencies, stablecoins, and the second phase of the digital Hong Kong dollar pilot program. Huaxia Hong Kong is keeping pace with the times, conducting in-depth research on the cryptocurrency asset industry, with a particular focus on product innovations such as the tokenization of real-world assets and Bitcoin/Ether spot ETFs, and actively participating in the Monetary Authority's experimental sandbox. He believes that as the recognition of Web 3.0 technology in financial innovation increases, digital assets have become an indispensable part of the market, and Hong Kong's digital asset industry has immense development potential.

Regarding the special regulations of the Hong Kong Securities and Futures Commission on cryptocurrency spot ETFs, Zhu Haokang pointed out that, compared to the United States, Hong Kong allows cash and physical subscriptions, which is a significant difference. Although the current market size of spot Bitcoin ETFs in the United States is larger, Hong Kong, as one of the first regions to approve spot Ether ETFs and allow retail participation, may have a competitive advantage.

The Hong Kong Securities and Futures Commission has established a strict regulatory framework for cryptocurrency asset funds, requiring fund management companies to have a good regulatory track record, to only invest in assets listed on licensed cryptocurrency trading platforms, and prohibiting leverage exposure at the fund level. In terms of custody, the fund's trustee or custodian may only delegate the custody of cryptocurrency to licensed institutions or institutions that meet the standards of the Monetary Authority.

Zhu Haokang emphasized that the regulatory and licensing framework implemented in Hong Kong strictly adheres to anti-money laundering, know your customer, and know your token standards, establishing stringent rules to protect investors, including secure asset storage, detailed KYC/KYT procedures, AML regulations, and anti-terrorist financing measures.

Currently, qualified investors, institutional investors, retail investors, and eligible international investors in Hong Kong can invest in cryptocurrency ETFs. Mainland Chinese investors are currently unable to invest in cryptocurrency ETFs in Hong Kong. Specific investment qualifications can be consulted through brokers and sales channels, and attention should be paid to potential regulatory adjustments in the future.

Zhu Haokang proposed the 3D theory of digital assets, which stands for Defensive (risk defense), Diversification (investment diversification), and Decision (investment decision-making). He believes that Bitcoin, as a decentralized digital currency, performs well during risk-averse periods and can mitigate the systemic risks of the traditional financial system. In the long term, the low correlation of Bitcoin with traditional assets makes it an effective tool for portfolio diversification.

Huaxia Fund, as the largest ETF issuer in China, has 26 years of asset management experience. As of the end of March 2024, it manages assets exceeding 2.15 trillion RMB. Huaxia Fund (Hong Kong), as its wholly-owned subsidiary, has been established in Hong Kong for 16 years and has won over 90 industry authoritative awards, making it one of the top Chinese-funded fund companies in Hong Kong.

Zhu Haokang stated that Huaxia Fund (Hong Kong) has rich experience in ETF management and a strong team, with obvious advantages in managing liquidity, tracking error, premium/discount, and bid-ask spread. They are confident about the future of Hong Kong in the innovation of digital assets and the development of Web3.0.