April 18, 2024
By Sharan Kaur Phillora
Hong Kong is poised to launch its first spot Bitcoin and Ethereum exchange-traded funds (ETFs) by April 30, according to Markus Thielen, founder of 10x Research and a former research head at Matrixport. This follows Hong Kong’s conditional approval for several cryptocurrency ETF applications, heralding a significant shift in the Asian financial landscape.
Here’s what we know:
The approval by Hong Kong regulators of applications from prominent firms such as China Asset Management, Harvest Global, Bosera, and HashKey coincides with a global uptick in demand for crypto assets, spurred by the U.S. greenlighting Bitcoin ETFs earlier this year. This has catalyzed the most recent bull run in cryptocurrency markets.
However, the potential success of these ETFs hinges crucially on Chinese mainland investors’ participation. The Shanghai Stock Exchange’s southbound stock connect program, which permits mainland investors to buy Hong Kong stocks, has a substantial unused quota. “If mainland investors were allowed to purchase these ETFs, they could potentially allocate between $15 billion and $25 billion,” Thielen explained to Decrypt.
But Thielen remains cautious, noting that the inclusion of these ETFs in the southbound program might not occur for at least another six months, as current rules require Hong Kong ETFs to be listed for half a year before eligibility. Despite this, the strategic placement of these ETFs in Hong Kong could signify China’s intent to diversify its asset base amid ongoing property sector concerns and long-term stock market slumps.
Even though China banned cryptocurrency trading and mining in 2021, its interest in the sector has persisted. In a telling development, Binance processed $90 billion in transactions from China in just one month of 2023, indicating robust activity from Chinese traders.
Experts believe that Hong Kong is becoming a crypto hub under China’s watchful eye, possibly serving as a test bed for future financial innovations. This careful orchestration underscores China’s influence over Hong Kong’s economic strategies, ensuring that even significant financial moves align with broader national interests. Despite the enthusiasm surrounding these ETFs, cultural preferences for direct investments over diversified funds might temper their success in Asia, Thielen cautioned. Yet, he remains optimistic about their market potential, given their appeal as nearer to direct investments.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
