Venture Smart Financial Holdings Ltd. (VSFG), a Hong Kong-based financial services firm, is preparing to apply for a spot Ethereum exchange-traded fund (ETF) in anticipation of potentially launching its spot bitcoin ETF in the first quarter.

In a Friday interview with The Block, VSFG Chairman Lawrence Chu said that the firm is in the final phase of officially submitting its application for a spot bitcoin ETF to the Hong Kong Securities and Futures Commission.

In Hong Kong, extensive regulatory discussions typically precede the submission of an application, according to Chu. “Submission [for application] is almost like when you're 95% there,” he added.

Chu noted that the company is targeting a second-quarter submission for a spot Ethereum ETF, provided its spot bitcoin ETF is approved and listed in the first quarter. “But that really depends on the conversation we have with the regulator,” he said. “We will be ready.”

Last month, Livio Weng, chief operating officer of Hong Kong crypto exchange HashKey, said that around 10 fund companies have started looking into launching potential spot crypto ETFs in the city.

Possible fee war?

With several fund companies in Hong Kong preparing to apply for spot bitcoin ETFs, there could be a race to lower fees among asset managers, similar to what has been observed in the U.S.

“There will be a few [ETFs] that come out,” Chu said. “Our role is slightly nuanced because I think we're also trying to help ETF issuers get into the game.”

Chu pointed out that U.S. ETF issuers tend to have their own digital asset teams. “In Hong Kong, there's a bit of a licensing requirement but also a knowledge gap. Most ETF issuers don't have a digital asset team.”

“It becomes less of a competition for us, but rather it's competition between ETF issuers on their marketing side,” Chu continued. “From that point of view, you can think of us as more of a service provider to all ETF issuers.”