Hong Kong’s preliminary approval of ether spot exchange-traded funds could give the region a competitive advantage over the United States in the retail ETF spot market, an OSL official said.
Gary Tiu, executive director and head of regulatory affairs at OSL, said in an interview with The Block on Monday that the approval in principle of spot ether products was “absolutely perfect.”
“For the moment, the United States has not approved any spots ETH
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some products. So Hong Kong managers are definitely in a very good position when they launch ETH products in Hong Kong,” Tiu said.
Tiu’s comments come after the Hong Kong Securities and Futures Commission today. gave its approval in principle to a multitude of Bitcoin and Ether spot ETFs, including those in which OSL acts as sub-custodian and infrastructure service provider.
“Hong Kong’s approval of spot ether ETFs precedes a US decision and is an important step in Hong Kong’s journey to becoming a leading crypto hub,” said Angela Ang, former regulator of the Monetary Authority of Singapore and Senior Policy Advisor. at blockchain intelligence company TRM Labs. “With fewer alternatives for exposure to Ethereum, we could see ether ETFs attract more investor interest.”
“Very, very close” to launch
Tiu explained that approval in principle of the SFC generally means that the most important parts of the verification processes are completed.
“From a technical point of view, this means that these products are close to being ready for use,” Tiu said. “But maybe they still need to meet some technical conditions before they can launch the public offering.”
“In general, with product authorization, if they already have approval in principle, that means we’re getting very, very close,” he added.
Mainland investors are not allowed through Stock Connect
Some crypto industry players have said that Hong Kong’s upcoming spot crypto ETFs could attract substantial interest from Chinese mainland investors via the Southbound Stock Connect Program. However, this argument may be weak because the Stock Connect program currently does not allow mainland investors to invest in crypto futures ETFs in Hong Kong – let alone spot their crypto counterparts.
“I don’t believe in any of this [crypto ETF] products have been included in the list of eligible titles [of the Stock Connect program] for now, but I think the possibility or at least the potential of such inclusion is something that the market certainly likes,” Tiu said, adding that in the immediate term, “the position has not been clarified by no regulator on this subject.
“From day one, I don’t believe these products have been included or will be included immediately. But I think the market is certainly optimistic that there is a chance or potential for inclusion in the future. »
Fee war?
The US approval of spot Bitcoin ETFs earlier this year sparked a fee war among asset managers to stay competitive. Similar competition in fees and costs could follow when Hong Kong’s counterparts officially launch, according to Tiu.
“There will be [be a fee war] of course,” Tiu said. “We are talking about multiple products from multiple issuers launching at the same time, but tracking the same underlying asset. The ability to offer competitive prices to the market will be essential.
Subscription in kind, redemption
The main distinguishing features of the upcoming spot crypto ETFs are the in-kind subscription and redemption options they offer.
For example, according to the companies, the upcoming Bitcoin and Ether spot ETFs managed by Bosera Asset Management and HashKey Captial are expected to allow investors to subscribe to ETF shares using Bitcoin and Ether directly.
“The fund can accept in-kind subscriptions,” said OSL’s Tiu. “That means if you have an investor who holds long positions in BTC. But they don’t want to leave the BTC position. But they want to exchange it for another type of instrument – for example, for an ETF instrument or for a stake in the fund that tracks the performance of BTC – this now gives them the channel to do so.
Tiu added that this feature is important because it hasn’t been done in other markets, “certainly not in the retail funds space.”
“The work required to support this process for the [crypto] ETF products are actually quite important,” he continued.
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