The battle for Hong Kong's spot Bitcoin ETF begins: VSFG Capital, the first to announce its application
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The battle for Hong Kong's spot Bitcoin ETF begins: VSFG Capital, the first to announce its application
Hong Kong's first licensed virtual asset manager, holding Type 1, 4, and 9 licenses, capable of managing investment portfolios with 100% exposure to virtual assets.
Navigating Web3 tides with focused insightsBy Bo Wen, White Dew Salon
The birth of spot Bitcoin ETFs marks a victory for both Bitcoin and the market. Over the past decade, Bitcoin has steadily grown into one of the world’s best-performing assets. From a regulator's perspective, however, an uncontrolled asset absorbing massive capital poses systemic risks that could destabilize financial systems—an outcome too severe to bear.
Those in power need capital to remain within the established system. After nearly a decade of resistance, the U.S. SEC ultimately compromised on spot Bitcoin ETFs. In contrast, Hong Kong embraced the shift, seizing this pivotal opportunity. In the upcoming era of compliant competition, it still stands a chance to rival the United States.
Over ten institutions have begun preparing to launch virtual asset spot ETFs in Hong Kong led by Bitcoin. On January 19, 2024, VSFG Financial took the lead in announcing its plan, becoming the first financial institution to declare intentions to issue a spot Bitcoin ETF in Hong Kong. This article from White Dew Salon takes a closer look at VSFG Financial to understand the strength behind the applicant and help investors make better decisions.
Understanding VSFG Financial
VSFG Financial, also known as VSFG, includes VSFG Capital Asia (VSFG Asia) and VSFG Asset Management Limited (VSFG AM), both licensed corporations authorized by the Securities and Futures Commission (SFC) to conduct Type 1 (Securities Trading), Type 4 (Advising on Securities), and Type 9 (Asset Management) regulated activities.
In asset management, VSFG operates under a private banking model, delivering external asset management services to high-net-worth individuals through internationally renowned private banks. It also specializes in private equity funds covering various financial asset classes across Greater China, including blockchain, artificial intelligence, art investment, esports, and virtual assets, offering co-investment opportunities directly to institutional and professional investors.
Additionally, VSFG provides institutional and professional investors with one-stop solutions for virtual asset allocation. Going forward, it will focus on asset tokenization and digital wallet services, enabling investors to manage diversified portfolios anytime, anywhere.
Mr. Arthur Chu, Chairman of VSFG Financial, brings over 15 years of investment experience. He previously served as an analyst in the Investment Banking Division at UBS (London branch), worked in the Chairman’s Office at EMIMusic London, was Deputy Director of Global Asset Management at UBS (Hong Kong branch), and served as a non-executive director at Wang Tat Fu Holdings Limited. He holds a Bachelor of Arts in Economics from the University of Chicago, USA.
Extensive Experience in Virtual Assets
VSFG Capital Asia is the first SFC-licensed virtual asset manager in Hong Kong permitted to manage portfolios fully invested in virtual assets, giving it substantial operational experience in the virtual asset sector.
On April 20, 2020, Arrano Capital, the blockchain division of VSFG Capital Asia, launched Hong Kong’s first SFC-regulated virtual asset fund. This passively managed Bitcoin-tracking fund offers professional investors access to Bitcoin through a traditional fund structure.
On April 14, 2021, Arrano Capital announced the launch of the Arrano Alpha Fund, an actively managed virtual asset fund regulated by the SFC, with VSFG Asia serving as investment manager. Compared to the first fund, it offers greater flexibility in portfolio allocation.
On June 1, 2023, Arthur Chu stated that VSFG Financial was preparing to apply for SFC license Type 7 (Automated Trading Services) and was discussing with several Hong Kong-based ETF issuers and regulators the possibility of listing its Bitcoin-tracking fund as an ETF to achieve larger scale.
Partnering with Value Partners to Launch Spot Bitcoin ETF
On December 22, 2023, the Hong Kong SFC released its “Notice on SFC-Authorized Funds Involving Virtual Assets,” signaling readiness to accept applications for spot virtual asset ETFs. Early this year, following the U.S. SEC’s approval of 11 spot Bitcoin ETFs, the era of compliant virtual assets officially began. Hong Kong is accelerating efforts to rapidly establish spot Bitcoin ETFs locally, reinforcing its status as a global financial hub.
For more details, see: 2023 Annual Review of Hong Kong’s Virtual Asset Policy: Dawn Is Breaking
On January 19, 2024, Bloomberg reported that VSFG Financial announced plans to submit an application to the Hong Kong SFC to launch a spot Bitcoin ETF in Q1 2024.
On January 21, 2024, Arthur Chu publicly revealed that VSFG Financial had reached a cooperation agreement with a local fund house and was preparing to submit a spot virtual asset ETF application, aiming to formally file before Lunar New Year and launch in the first quarter, with an initial target of reaching USD 500 million (approximately HKD 3.9 billion) in assets under management (AUM) by year-end.
Regarding how Hong Kong can compete globally, Arthur Chu noted: "While the U.S. targets its own time zone, Hong Kong-listed ETFs can focus on the Asian market. Although ETFs are accessible to retail investors, we’ve engaged with various institutional investors over the past year—not only from Hong Kong and mainland China but especially from South Korea, Japan, and Taiwan. There is strong demand across the Asian time zone, and we expect increasing interest from other fund houses."
"Currently, no spot virtual asset ETF has been approved by the SFC, and the industry needs time to prepare. According to the circular, custodians for SFC-authorized virtual asset funds must be either SFC-licensed virtual asset trading platforms or banks meeting the HKMA’s virtual asset custody standards. It is understood that the HKMA has completed industry consultations on guidelines for virtual asset custody services and is now reviewing feedback before proceeding further. In other words, only locally licensed virtual asset exchanges can currently serve as custodians."
Arthur Chu added: "VSFG launched an SFC-approved spot Bitcoin tracking product for professional investors back in 2020, so we already have relevant operational experience—the only difference being that the future ETF will be tradable on the Hong Kong Stock Exchange. ETFs involve retail investor considerations, and the exchange enforces stricter investor protections—for instance, requiring not just one but three independent pricing sources instead of relying on a single index provider. Current futures-based products use pricing from U.S. futures exchanges like CME, whereas spot prices come from multiple active virtual asset exchanges."
Value Partners Hong Kong Asset Management announced its entry into the space alongside VSFG Financial. On January 22, 2024, according to eFinancial News, Value Partners Hong Kong Asset Management and VSFG Financial signed a memorandum of understanding to jointly offer innovative investment solutions combining virtual assets with traditional investment tools for both retail and institutional investors.
Value Partners brings over 30 years of asset management experience in Hong Kong. As the first step in their collaboration, the two Hong Kong-based firms will jointly explore launching a spot Bitcoin ETF in Hong Kong.
Ms. Helen Wong, Group CEO of Value Partners, said: "While recognizing the untapped opportunities in the growing trend of virtual assets, we have strategically partnered with VSFG, a pioneer in Hong Kong’s virtual asset management industry, to provide digital investment solutions to our clients."
"Our plan to launch a spot Bitcoin ETF marks our first joint initiative, enabling Hong Kong investors to gain exposure to the world’s largest digital asset while enjoying the convenience and efficiency of ETFs. With Value Partners’ extensive expertise and proven track record in ETF management and VSFG’s deep experience in virtual assets, we are well-positioned to offer clients more investment choices—especially in virtual assets—to help them seize market opportunities and navigate this dynamic and evolving landscape."
With VSFG Financial and Value Partners entering the race, the battle for Hong Kong’s spot Bitcoin ETF has officially begun. Who will be the next contender? Stay tuned.
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