The virtual asset landscape has undergone rapid development in recent years. In addition to directly buying and holding virtual assets, investors can also gain exposure to virtual asset via ETFs listed on the exchanges. Virtual asset futures ETFs were launched in Hong Kong in 2022, and virtual asset spot ETFs are also available now, providing more options for investors interested in virtual assets.
As the name suggests, virtual asset spot ETFs hold spot virtual assets, which can directly reflect the performance of the corresponding virtual assets. Virtual asset spot ETFs listed in Hong Kong are regulated by the Securities and Futures Commission, and are required to meet specific requirements in terms of investment scope, counterparties, asset custody, etc., to address the novel risks of virtual assets and provide protection for investors.
Features of virtual asset Spot ETFs listed in Hong Kong
| Underlying assets | Holding spot virtual assets, thus reflecting the performance of the underlying virtual assets. |
| Investment scope | Virtual assets that are accessible to the Hong Kong public for trading on SFC-licensed virtual asset trading platforms (“Licensed VATPs”), e.g. bitcoin and ethereum. Also, virtual asset spot ETFs are allowed to earn yields on their virtual asset holdings through staking. |
| Counterparties | To ensure they are conducted in a regulated environment and mitigate counterparty risks, transactions, acquisitions and staking of virtual assets can only be conducted through Licensed VATPs or authorised financial institutions regulated by Hong Kong Monetary Authority. |
| Asset custody | To reduce custody risks, virtual asset spot ETFs have to safekeep the virtual asset holdings at designated locally regulated entities, i.e. Licensed VATPS or authorised financial institutions. |
| How to trade? | Listed on the HKEX, investors can buy and sell virtual asset spot ETFs through securities firms or banks. (Some of the virtual asset spot ETFs offer unlisted class units which operate very similarly to unlisted funds. Investors can subscribe or redeem the units via securities firms or banks.) |
A convenient investment may not be for everyone
Similar to stocks or other ETFs, investors can buy and sell virtual asset spot ETFs through securities firms or banks, which is very convenient and simple. However, this does not mean that virtual asset spot ETF is suitable to everyone. As virtual asset spot ETFs hold virtual assets, they are directly exposed to risks of virtual assets, in particular that virtual assets are a new type of asset and highly speculative. The prices of virtual assets often fluctuate significantly and may decline sharply, or even to zero, in a short period of time. In addition, this type of ETFs carries other risks, such as custody risk, cybersecurity risk, fork risk, risk of volatility of a single asset, trading risk and risks associated with staking. (Please refer to the feature article to understand the operation and risks of virtual asset spot ETFs.)
The prices of virtual assets have been extremely volatile, more so than stocks, bonds and other conventional commodities. If you plan to invest in virtual assets or related ETFs, they should only be part of your overall investment portfolio. It’s crucial to do your own research and understand the features, operation and risks thoroughly. You should also evaluate your risk appetite, diversify your portfolio and avoid gambling mentality or following the crowd blindly when making investment decisions.
Updated on 28 April 2025
