Asia dispatch
- The emergence of Bitcoin and Ether ETFs in Hong Kong has raised expectations for China's demand for cryptocurrencies.
- Several Chinese asset management companies are participating.
- Some analysts say demand may not materialize.
When Hong Kong approved the rollout of Bitcoin and Ether spot ETFs on April 15, one of the most important implications was whether mainland Chinese investors would have access.
Since 2021, Chinese crypto investors are prohibited from speculating in the market, so this could potentially be huge. If mainlanders can start pouring money into the market, it will become a major new source of liquidity.
Alessio Quarini, co-founder and CEO of Hex Trust, said: DL News Earlier this week, it was announced that Hong Kong could unlock billions in potential demand by accepting cryptocurrencies.
“While the official stance on mainland investors' participation remains unclear, China's recent interest in alternative assets such as gold suggests a potential appetite for exposure to Bitcoin,” Quarini said. “There is,” he said.
Stay ahead with our weekly newsletter
catch? It is unclear whether China's restrictions on investing in cryptocurrencies also extend to ETFs.
If restrictions don't apply to ETFs, this could be the key to generating lots of new investment money.
But that's a big assumption. The process of turning Hong Kong's plan into a practical blueprint for asset managers has only just begun.
Eric Balciunas, for one, isn't so sure China is comfortable with this new avenue of speculation.
Join our community for the latest stories and updates
A senior ETF analyst at Bloomberg Intelligence warned investors this week not to expect large inflows from mainland China into Hong Kong Bitcoin funds.
“I think they'll be lucky to get $500 million,” Balciunas said. Said At X.
“The situation could change if Chinese investors start buying but the government doesn't crack down, but as far as we know the government's ban on Bitcoin would include ETFs,” he said.
Even if Chinese investors are kept out, potential Bitcoin and Ether ETFs have strong ties to mainland China.
Still, Hong Kong and the mainland have operated cross-border investment programs in financial products, including ETFs, for about a decade.
According to the Hong Kong Stock Exchange's website, the Connect program requires certain criteria to be met, including that the ETF be listed for at least six months and maintain average daily assets under management of at least HK$1.7 billion (US$217 million). is required to be fulfilled. .
circumvent restrictions
So far, however, investment regulations surrounding cryptocurrencies have not deterred Chinese citizens much.
According to Chainalysis, $86.4 billion in raw trading volume from July 2022 to June 2023 came from the Chinese market.
Even if Chinese investors are kept out, potential Bitcoin and Ether ETFs have strong ties to mainland China.
The approved providers of Bitcoin and Ether offerings, Harvest Global, Vocera, and China Asset Management, are mainland Chinese companies with offices in Hong Kong.
In the case of Harvest Global, the ETF approval comes even as the company has begun to scale back its overseas product offerings and shift to supporting overseas investment in mainland China. According to Reuters, the company cut its workforce in Hong Kong by half in January this year.
“This is a strong signal that at least the mainland is open to this,” said BitGo's APAC managing director HB Lim. DL News.
“Whether it opens up for local Chinese to trade is another story.”
Snacks
- Hong Kong approved the first Spot Bitcoin ETF and Spot Ether ETF on April 15th.
- In other ETF news, other countries in Asia, including South Korea and Taiwan, could be poised to launch spot Bitcoin ETFs.
- Binance is finally planning to establish its official headquarters. Maybe it's in Singapore?
Callan Quinn is DL News” Asia correspondent based in Hong Kong.contact address callan@dlnews.com.
