The launch of Bitcoin and Ethereum spot ETFs in Hong Kong marks a pivotal moment in the region’s financial innovation. As anticipation builds for regulatory approval, Victory Securities has emerged as a trailblazer—becoming the first brokerage in Hong Kong authorized to facilitate in-kind subscriptions for spot Bitcoin and Ethereum ETFs at the primary market level. This guide provides a comprehensive overview of how investors can participate, covering eligibility, account setup, subscription processes, fees, arbitrage opportunities, and tax implications.
With major asset managers like Bosera, ChinaAMC, and Harvest Fund receiving green lights from the Securities and Futures Commission (SFC), the stage is set for institutional-grade crypto access. For digital asset holders, particularly those navigating restrictive banking policies around crypto withdrawals, this development unlocks a compliant on- and off-ramp—boosting market confidence and adoption.
Why In-Kind Subscription Matters
In-kind subscription allows investors to exchange actual Bitcoin or Ethereum for ETF shares during the initial offering phase. This mechanism is especially valuable in Hong Kong’s current landscape, where traditional banks remain cautious about crypto-related transactions.
👉 Discover how in-kind ETF subscriptions open new doors for crypto investors.
By enabling direct token-to-ETF conversions through regulated channels, Victory Securities offers a secure, auditable path that aligns with SFC requirements. It eliminates the need to liquidate holdings into fiat—preserving exposure while gaining access to a regulated investment vehicle.
Moreover, spot ETFs address two core concerns in crypto investing: security and compliance. ETF issuers partner with reputable custodians to safeguard assets, removing private key management burdens from individual investors. Regulatory oversight ensures transparency and reduces counterparty risk—making these products appealing not only to retail but also to institutional players.
Given that the U.S. SEC has yet to approve a spot Ethereum ETF, Hong Kong’s move could position it as a first-mover in offering diversified digital asset exposure—creating unique opportunities for global capital.
Victory Securities: Leading the Charge in Primary Market Access
Under SFC guidelines, any in-kind creation or redemption of crypto ETFs must go through licensed intermediaries who can transfer digital assets to and from fund custodians. Victory Securities stands out as the first and currently only broker approved for this role, giving it a significant first-mover advantage.
Holding all three key SFC licenses—Type 1 (Dealing in Securities), Type 4 (Advisory Services), and Type 9 (Asset Management)—Victory is uniquely positioned to serve both retail and institutional clients. Notably, it’s the first Hong Kong broker permitted to support crypto deposits and withdrawals, reinforcing its role as a bridge between traditional finance and digital assets.
The recent launch of VictoryX, its multi-market trading app supporting virtual assets, Hong Kong stocks, and U.S. equities, further strengthens its ecosystem. Seamlessly integrated with ETF subscription workflows, VictoryX enables timely participation in primary market offerings.
How to Subscribe: Step-by-Step Guide
Eligibility Requirements
Hong Kong-based ETFs are subject to strict distribution rules. Per the Joint Circular issued by the SFC:
- Mainland Chinese investors are prohibited from purchasing virtual asset ETFs directly or indirectly.
- Sales to entities or individuals in mainland China are not permitted without prior regulatory approvals.
- The feasibility of using "Southbound Trading" (Stock Connect) funds remains uncertain and is unlikely to be supported initially.
Eligible investors include Hong Kong residents, overseas individuals, and corporate entities meeting compliance standards.
Opening an Account with Victory Securities
To participate in ETF subscriptions, investors must first open a securities account with Victory Securities. The process varies slightly depending on residency and entity type.
For Mainland Chinese Residents:
- Mainland ID card
- Same-name mainland debit card (used only for identity verification)
- Valid email address
- Proof of address (if different from ID; utility bills, bank statements, etc., within last 3 months)
- Hong Kong bank account (for fund transfers post-account opening)
For Hong Kong Residents:
- Hong Kong ID card
- Recent address proof (within 3 months)
- Email address
- Hong Kong bank account
For Hong Kong Companies:
- Board resolution copy
- ID/passport and address proof for all directors, authorized traders/signers, and beneficial owners (>10% stake)
- Certificate of Incorporation (CI) and name change certificates (if applicable)
- Articles of Association
- Company address and bank account proofs
- Latest annual return and shareholder/director change forms
- Business Registration Certificate (BR)
- Shareholding structure chart (signed by director)
For Overseas Companies:
Same documentation as above, plus:
- Director register and shareholder register
- Certificate of Incumbency (issued within last 6 months)
👉 Start your journey toward crypto ETF investment today—open your account now.
After completing the standard securities account setup, applicants must submit four additional forms to activate virtual asset trading permissions:
- Supplemental Agreement for Virtual Asset Trading
- Risk Disclosure Statement for Virtual Assets
- Risk Tolerance Questionnaire
- Knowledge & Experience Assessment
Primary Market Subscription Methods
Once the account is active, investors can choose between two subscription methods.
In-Kind Subscription (For Crypto Holders)
Ideal for those already holding BTC or ETH:
- Open Account: Complete onboarding with Victory Securities.
- Deposit Crypto: Transfer Bitcoin or Ethereum to Victory’s exchange-hosted wallet.
- Submit Instruction: Work with an investment manager to assess suitability; upon confirmation, Victory executes the ETF share purchase using deposited crypto.
- Receive Shares: ETF units are credited to your account; monthly statements confirm holdings.
This method preserves long-term conviction while gaining regulated exposure.
Cash Subscription (For New Investors)
Suitable for those entering the space via fiat:
- Open Account: Standard registration process.
- Place Order: Submit subscription instructions via VictoryX or customer service.
- Fund Transfer: Deposit HKD into Victory’s designated bank account; funds are forwarded to the ETF custodian.
- Allocation & Settlement: HKSCC allocates shares to Victory, which then credits them to your portfolio.
Cash subscriptions carry typical market risks but offer simplified entry without managing private keys.
Fees and Arbitrage Opportunities
While exact fee structures will be confirmed upon product launch, early indications suggest competitive pricing aligned with conventional ETF offerings.
A key advantage of in-kind primary market participation is potential arbitrage. Due to demand imbalances across markets, newly issued ETF shares often trade at a premium in secondary markets shortly after listing—creating a short-term profit opportunity.
Even if prices dip, investors using in-kind subscriptions retain downside protection: they can later redeem ETF shares for underlying assets ("coin-in, coin-out"), safeguarding their original holdings.
👉 Explore how early access can unlock strategic advantages in emerging crypto markets.
Tax Considerations for Investors
Hong Kong follows a territorial tax system—only income sourced within Hong Kong is taxable. Importantly:
- Capital gains are generally not taxed for individuals.
- Selling Bitcoin or Ethereum ETF shares typically does not trigger capital gains tax for individual investors.
- Dividends from ETFs are also usually tax-exempt.
- However, short-term trading patterns may lead authorities to treat gains as trading income, subjecting them to profits tax (8.25% on first HK$2 million; 16.5% above).
Corporate investors face standard profits tax rates:
- First HK$2 million: 8.25%
- Above: 16.5%
- Sole proprietors/partnerships: 7.5% and 15%, respectively
Dividend income remains non-taxable for corporations.
Frequently Asked Questions (FAQ)
Q: Can mainland Chinese investors buy Hong Kong Bitcoin ETFs?
A: No. Under current SFC rules, virtual asset ETFs cannot be sold directly or indirectly to mainland individuals or entities without explicit government approval.
Q: Is there a minimum investment amount?
A: While exact thresholds depend on the ETF provider, most require a minimum number of creation units (typically valued in six figures). Contact Victory Securities for specifics.
Q: Can I redeem ETF shares for actual Bitcoin or Ethereum?
A: Yes—through in-kind redemption mechanisms available in the primary market, allowing "coin-out" functionality.
Q: Are there risks involved in cash-based ETF subscriptions?
A: Yes. Unlike in-kind subscriptions, cash investors face full market risk—if the ETF price drops below purchase value, losses are realized.
Q: Does VictoryX support real-time portfolio tracking?
A: Yes. The VictoryX app provides live updates on holdings, transaction history, and market data across crypto and traditional assets.
Q: Will more brokers offer in-kind subscriptions soon?
A: Possibly—but Victory Securities currently holds exclusive status as the first SFC-approved participant. Others may follow after regulatory review.
As Hong Kong advances its digital asset agenda, the launch of spot Bitcoin and Ethereum ETFs represents more than just financial innovation—it's a strategic step toward becoming Asia’s leading crypto hub. With clear regulation, strong custody solutions, and accessible investment pathways via firms like Victory Securities, the region is poised to rival even Wall Street in shaping the future of asset management.