The recent launch of Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) in Hong Kong has opened up new opportunities for traders in Asia. While the initial week of trading for spot ETFs in Hong Kong was not as enthusiastic as in the United States, the proximity of Hong Kong to China has sparked discussions about whether mainland Chinese investors will have access to these ETFs.
Richard Byworth, a managing partner at SyzCapital and BTC investor, has fueled speculation with his recent comments suggesting that Bitcoin ETFs listed in Hong Kong could soon be accessible to investors from mainland China. Byworth, in response to Samson Mow, mentioned that he had heard talks about the spot BTC ETF being added to Stock Connect.
Stock Connect is a program that allows qualified investors from one market to access eligible shares in another market, within a specified quota. The Shenzhen-Hong Kong Stock Connect, which is a cross-border investment route, connects the Shenzhen Stock Exchange and the Hong Kong Stock Exchange. Investors in either market can use their local brokers and clearing houses to trade shares in the other market. However, the program has a daily quota.
While Byworth’s comments are currently just rumors, China’s anti-crypto stance has made it a topic of discussion on social media. Brian HoonJong Paik, the co-founder and chief operating officer at SmashFi, also addressed the rumors of mainland Chinese investors potentially accessing the Hong Kong ETFs in the near future. Paik stated that 70% of Chinese wealth is in real estate and that the Chinese Communist Party needs an alternative asset to mitigate social unrest, given the large number of empty homes in the country.
Paik highlighted several trade arrangements between the Shanghai and Hong Kong markets that could potentially allow Chinese investors to invest in spot BTC ETFs in Hong Kong. These include the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect, and the Qualified Domestic Institutional Investor scheme, which allows qualified Chinese institutional investors to invest in overseas markets, including Hong Kong. Additionally, the mutual recognition of funds agreement between Hong Kong and mainland China allows eligible funds from both regions to be distributed in each other’s markets.
It is worth noting that China banned Bitcoin mining and foreign crypto exchanges from serving mainland customers in 2021. However, despite the overall ban on crypto-related businesses and services, Chinese courts have recognized BTC as legal property in several jurisdictions.
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