- Mainland China continues to enforce a ban on cryptocurrencies, restricting mainland investors from accessing these new Hong Kong-based ETFs.
- Despite potential increases in cryptocurrency trading in Hong Kong, the Southbound Stock Connect program excludes digital currencies, preventing similar increases in Mainland China.
Hong Kong has recently approved the launch of new cryptocurrency Exchange-Traded Funds (ETFs) that include Bitcoin and Ethereum.
Managed by Bosera Capital, Harvest Global, and China Asset Management, these ETFs are expected to increase the demand for cryptocurrencies, potentially leading to higher prices.
Despite the buzz around Hong Kong's Bitcoin ETF, analyst Eric Balchunas foresees modest capital inflows at around $500M. With a smaller ETF market and fewer institutional players, challenges lie ahead. #Bitcoin #ETF #HongKong pic.twitter.com/HPwuiuopKW
— Marcel Knobloch aka Collin Brown (@CollinBrownXRP) April 15, 2024
A report by Forbes indicates that the introduction of these ETFs is anticipated to attract investment inflows into Hong Kong, prompting a competitive scenario with cryptocurrency funds in the United States.
In January, the SEC sanctioned several new spot Bitcoin ETFs, which now manage over $50 billion in assets.
“Just a year after Hong Kong gave regulatory clarity for digital exchanges in June 2023, they are again demonstrating a push toward being a leading if not progressive, financial hub for the region by allowing spot bitcoin ETFs,” Michael Silberberg, head of investor relations at crypto hedge fund Alt Tab Capital, said in emailed comments, predicting it will “likely encourage similar regulatory frameworks” around the world.
Related: Breaking: China’s Ethereum Holdings Pose Global Crypto Risk
Eric Balchunas recently discussed the status of Hong Kong’s spot Bitcoin ETFs, noting they have approval to exist but not yet to launch, with rumors of a launch next week to avoid clashing with a conference in Dubai.
Latest on HK spot Bitcoin ETFs: They have been approved to exist but not launch (yet). Rumor has it launching next wk so to not compete w Dubai conf. Don't expect a lot of flows (I saw one estimate of $25b that's insane). We think they'll be lucky to get $500m. Here's why:
1. HK…— Eric Balchunas (@EricBalchunas) April 15, 2024
Despite some estimates predicting $25 billion in flows, Balchunas believes they might only attract $500 million due to several factors: Hong Kong’s ETF market is relatively small at $50 billion, local Chinese are officially barred from purchasing these ETFs.
The issuers involved are smaller companies without major players like BlackRock, and the less liquid and efficient market ecosystem could lead to wider spreads and premium discounts on these ETFs. The fees are expected to be between 1-2%, significantly higher than those in the U.S. market.
Just to be clear, all this is clearly positive for bitcoin as it opens up more avenues to invest, I'm just sayying its child's play vs US. Also long-term some of this could go away: more liq, tighter spreads, lower fees and bigger issuers involved. But short/medium term we have…
— Eric Balchunas (@EricBalchunas) April 15, 2024
Despite the growing interest in cryptocurrency ETFs in Hong Kong, Mainland China maintains a ban on cryptocurrencies.
Consequently, mainland investors are currently barred from accessing these new financial products. Regulatory constraints ensure that mainland funds cannot participate in these Hong Kong-based cryptocurrency ETFs.
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ETF providers in Hong Kong have stated that the Southbound Stock Connect program, which aims to boost cross-border investments between Mainland China and Hong Kong, does not cover digital currencies because of China’s regulatory policies on the risks associated with cryptocurrencies.
Consequently, although cryptocurrency trading may rise in Hong Kong, Mainland China will not experience a similar increase in these activities.
Bitcoin is currently trading at $62,480.78, witnessing a notable decrease of 6.16%.
