Mainland China’s investors may soon channel billions into Hong Kong’s crypto ETFs.
Major Chinese asset managers are on the brink of launching spot Bitcoin and Ethereum exchange-traded funds (ETFs) in Hong Kong, possibly as early as Monday, Bloomberg reported on Friday, citing anonymous sources familiar with the matter. The timeline, however, remains tentative, sources noted.
Harvest Fund Management Co.’s international division and a joint venture between Bosera Asset Management (International) Co. and HashKey Capital are the two potential ETF issuers, Bloomberg’s sources said.
As noted, the two entities plan to roll out their ETFs by the end of the month, pending approval from the Securities and Futures Commission (SFC) and finalizing listing arrangements with Hong Kong Exchanges & Clearing Ltd.
The report follows news earlier this week that prominent Chinese asset managers have applied for spot Bitcoin ETFs through their Hong Kong subsidiaries. According to Bloomberg, on April 9, SFC granted Harvest and China Asset Management clearance to provide virtual-asset-related fund management services.
Hong Kong Bitcoin ETFs poised to attract $25 billion
The potential approval of Hong Kong-listed spot Bitcoin ETFs could unlock up to $25 billion in demand from mainland China as qualified Chinese investors may be allowed to access the funds through the Southbound Stock Connect program, said Matrixport in a Friday report.
“A likely approval of Hong Kong-listed Bitcoin Spot ETFs could attract several billion dollars of capital as mainland investors take advantage of the Southbound Stock Connect program, which facilitates up to 500 billion RMB (HK$540 billion and $70 billion) per year in transactions,” said Matrixport. “Based on the (potential) available capacity, this might result in up to 200 billion Hong Kong dollars of available capacity for those HK Bitcoin ETFs—or US$25 billion.”
The Southbound Stock Connect program sets a yearly limit of HK$540 billion for Chinese investment in Hong Kong-listed stocks. However, 360MarketIQ’s data shows the quota hasn’t been fully used in the past three years, leaving around HK$100-200 billion annually unused capacity.
Matrixport suggested that this unused quota could be directed towards the Bitcoin ETF if approved.
After the debut of US spot Bitcoin ETFs, global investors have seen Hong Kong as the next hub for crypto ETFs due to the country’s regulatory environment.
In late December last year, the SFC and the Hong Kong Monetary Authority (HKMA) issued new rules addressing the possibility of investment funds, brokerages, and asset managers offering crypto ETFs. The move was seen as preparation for upcoming crypto ETF products.