Bitcoin ETF: A New Chapter in Hong Kong's Financial Innovation

The launch of the Bitcoin ETF has sparked heated discussions in the market. Bullish expectations drove the price of Bitcoin to break previous highs, and subsequently, some investors took profits, leading to a price correction, which aligns with typical commodity trading logic.

The key issues regarding the future Bitcoin and Ethereum spot ETFs include:

1. Hong Kong regulatory environment and product characteristics
2. Global Trading Volume and Its Impact
3. Interaction between traditional finance and the cryptocurrency asset market, sources of funds, and institutional layout.

Regulatory Attitude and Approval Speed

The attitudes towards cryptocurrency asset ETFs vary significantly across different regions, closely related to their regulatory systems. Europe (, including Canada ), has a centralized regulatory power, allowing for quicker decision-making. In contrast, the United States experiences slow approval due to disagreements among regulatory agencies.

Comparison of Regulatory Frameworks Across Countries:

| Country | Approval Time | Regulatory Authority | Reason | Approval Speed | |-----|---------|------|------|--------| | United States | January 2024 | CFTC, SEC | Regulatory Authority Dispute | Slow | | Hong Kong | April 2024 | SFC | Concentration of Regulatory Authority | Fast | | Canada | February 2021 | CSA | Unified Regulation | China |

Comparison of Cryptocurrency ETFs in Hong Kong, the United States, and Canada:

| | Hong Kong Spot ETF | US Spot ETF | Hong Kong Futures ETF | |----------|------------|------------|------------| | Underlying Assets | BTC, ETH Spot | BTC Spot | BTC, ETH Futures | | Trading Currency | HKD, USD, CNY | USD | HKD | | Trading Time | Asian Time | US Time | Asian Time | | Redemption Method | Physical or Cash | Cash Only | Cash Only | | Non-listed Shares | Yes | No | No | | Trading Platform Regulation | SFC Regulation | Not SEC Regulated | CME | | Custodian Regulation | SFC Regulation | Partially SEC Regulated | SFC Regulation | | Insurance | Yes | No | No | | Derivatives Risk | None | None | High | | Rolling Cost | None | None | High | | Investor Qualification | Professional and Retail | Professional Only | Professional and Retail |

Trading Scale and Characteristics

1. It is expected that by the end of the year, the scale of the Bitcoin ETF in Hong Kong could reach 10 billion USD.

Comparison of ETF sizes in the United States, Hong Kong, and Canada:

| ETF Category | United States ( billion ) | Hong Kong ( billion ) | Canada ( billion ) | |--------|------------|------------|--------------| | Total Scale | 71900 | 521 | 301 | | Maximum single | 5030 | 590 | 100 | | Maximum BTC ETF | 264 | 100( expected ) | 13 |

2. Unique Advantages of Hong Kong Bitcoin/Ethereum ETFs

(1) The spot delivery mechanism enhances liquidity and market depth.

• Virtual asset exchanges gain pricing power and expand price discovery channels
• Compel exchanges to develop new tools and services
• Some securities companies have obtained physical delivery qualifications and enjoy the "bull market subsidy"

(2) No dividend withholding tax, higher investment returns

• Investing in U.S. ETFs requires a minimum of 30% withholding tax on dividends.
• Hong Kong has no capital gains tax, only frequent trading is taxed as income.

Market Impact of Bitcoin ETF

1. May exacerbate the outflow of funds from Hong Kong stocks

• In the case of scarce high-quality assets, capital withdrawal may lead to a price decline.
• Fund managers may follow the market leaders' allocation strategy and turn to BTC.

2. The participation of state-owned assets is expected to improve financing and customer expansion.

• Multiple public fund subsidiaries in Hong Kong have been authorized to issue virtual asset ETFs.
• The state-owned background increases investor confidence and may become a stabilizing force in the market.

3. Financial institutions need to explore integrated layouts

• Traditional financial institutions can extend to the upstream and downstream of the industry chain.
• Expand exchange business, reduce costs and launch competitive products

Conclusion

The launch of the virtual asset spot ETF marks an important advancement for the Hong Kong crypto market. It provides a compliant entry channel for traditional funds, enhances the legitimacy and market acceptance of virtual assets, and helps Hong Kong consolidate its position as a global Web3 financial center.