Hong Kong retail investors can use securities accounts to invest in spot Bitcoin and Ethereum ETFs

The launch of Hong Kong Bitcoin and Ethereum spot ETFs is imminent.

According to previous news, the Bitcoin spot ETF project had already made detailed communications and plans with the Hong Kong Stock Exchange in the early stages, and it is expected that the entire process will be completed in about 10 days. The China Securities Regulatory Commission originally planned that the Bitcoin spot ETF would be listed around April 25, no later than the end of April; the Ethereum spot ETF is expected to be listed in May.

Unlike previous individual retail investors who needed to open an account on a virtual asset trading platform, ETF trading only requires a traditional securities account, providing new individual retail investors with many conveniences in asset security, private key custody, wallet management and trading. Industry insiders generally believe that this change in investment method will create a bridge between the traditional and virtual asset markets, and will inject more fresh blood into the virtual asset market.

Hong Kong individual investors can use securities accounts to invest in spot Bitcoin and Ethereum ETFs

According to Hong Kong's TVB News, at present, investors who want to purchase virtual assets need to open an account at a virtual asset exchange; but with China Asset Management, Bosera Asset Management, and Harvest Asset Management announcing that they have obtained license approval from the Securities and Futures Commission and have cooperated with two licensed exchanges on the market to launch Bitcoin and Ethereum spot ETFs, individual investors who have obtained Hong Kong legal status or other eligible overseas legal status can now use securities accounts directly in Hong Kong to invest in spot Bitcoin and Ethereum without having to open an account at an exchange.

OSL Executive Director and Head of Regulatory Affairs Diao Jiajun said: "In the past, investors were concerned about security or were unfamiliar with platforms they had never used before. Now, investing through the most familiar channels and securities accounts they used to use must be attractive. For investors, there is a certain level of confidence that there is a well-known fund manager managing the product, ensuring the safety of the product and ensuring that it is linked to the index."

Blockchain technology consultant Li Sicong said: "Bitcoin spot exchange-traded funds (ETFs) were launched in the United States in the past few months. Once they launched spot ETFs, the entire Bitcoin market was very 'lively'. There is no Ethereum spot trading in the United States, and Hong Kong is ahead of the United States at this time. Some things cannot be bought in the United States. Can they be purchased in Hong Kong through this legal channel? There may be a chance. "

Wu Jiezhuang, a member of the Hong Kong Election Committee, said: "Some companies and families want to participate, but they don't know how to open a wallet and account. It is very complicated for them, but they can participate in the existing market. Recently, there was a Web3 Carnival, which brought a large number of tourists to Hong Kong. They are high-spending tourists. That week, hotel rooms and high-end restaurants were booked very well. This aspect can cause some new impact."

Physical redemption is expected to increase liquidity and arbitrage opportunities

Hong Kong spot Bitcoin and Ethereum spot ETFs not only give individual retail investors the opportunity to invest in virtual assets. More importantly, compared with the US market which only supports cash subscription and redemption of ETFs, physical subscription and redemption will provide Hong Kong individual investors with more diverse and suitable investment options.

On the one hand, physical ETF redemption will open up a compliant “withdrawal” channel for Bitcoin and Ethereum. Especially for institutions and high-net-worth investors, converting Bitcoin into an ETF with a nearly fixed ratio can effectively avoid potential card freezing problems when “withdrawing” through exchanges; at the same time, it can also reduce security risks in wallet and private key management, further protecting the security of their own assets.

On the other hand, potential arbitrage opportunities are also a focus worthy of attention. There are many brokerage firms and users in the secondary market, and there are obvious differences in the size of funds. After using the physical subscription method to obtain ETF shares in the primary market, as long as there is a premium in the secondary market, you can sell them for profit; even if the secondary market performs poorly, the "coin in and coin out" method can also retain virtual asset spot chips, and investors can effectively control the risk of losses.

Victory Securities is the first securities firm in Hong Kong that can subscribe for Bitcoin and Ethereum in the primary market. Currently, Victory Securities has been approved for Hong Kong virtual asset license No. 1 (virtual asset trading), license No. 4 (virtual asset consulting services) and license No. 9 (virtual asset management services). It is also the first securities firm in Hong Kong that can conduct virtual asset business for retail investors. Before the listing of this virtual asset spot ETF, Victory Securities seized the time window to launch the VictoryX Victory App, which integrates virtual assets, Hong Kong stocks and US stocks. The further optimization of the account opening and subscription process will bring rare market opportunities to Victory Securities.

It must be noted that users from mainland China cannot open an account directly at Shengli Securities. When submitting an account application, in addition to a mainland ID card, you will need a legal proof of overseas stay, address, and overseas residence and work, such as a Hong Kong Talent ID card, work visa, EP, Thai LinkedIn visa, etc.

Can Hong Kong surpass the United States?

The transaction cost of Bitcoin spot ETF in Hong Kong may be slightly higher than that in the US market: on the one hand, SFC requires virtual assets to be insured; on the other hand, SFC requires institutions to cooperate with ETF index providers. Although it is beneficial to protect the safety of investors' assets, the overall high cost makes the transaction fee of Hong Kong Bitcoin spot ETF not advantageous.

On the other hand, the listing and physical subscription of the Ethereum spot ETF has brought new opportunities to Hong Kong. In addition, Hong Kong's regulatory framework is clearer, and the supervision of virtual assets is clearer and more powerful, which is also beneficial for the industry to continue to innovate.

Even though the capital volume of the Hong Kong market is far less than that of the United States, the listing of virtual asset spot ETFs will still help Hong Kong attract funds and confirm its leading position in Asia. The world pattern symbolized by the East and the West has also been formed.

Can Hong Kong, with the launch of ETFs, become equal to the United States in the status of the world's virtual asset center? The answer will be clear two months after the listing.