Hong Kong Bitcoin ETFs Likely Not Available for Mainland Chinese Investors: Bloomberg

Analysts at Bloomberg Intelligence have pointed out that investors based in mainland China are unlikely to be permitted to invest in recently authorized Bitcoin ETFs listed in Hong Kong. This revelation has dampened enthusiasm for these funds even more.

It’s not shocking that the report reveals this, considering China’s strict anti-crypto stance. They prohibited crypto trading and mining within their borders back in 2021.

On Monday, it is reported that Hong Kong regulators gave their nod for the introduction of Bitcoin ETFs, paving the way for potential inflows of fresh investment into the cryptocurrency. Notable issuers in this endeavor are ChinaAMC, Harvest Global, and Bosera International. However, it was the issuers themselves who made this announcement, as opposed to the Securities and Futures Commission (SFC), Hong Kong’s securities regulatory body, which has remained silent on the matter.

Mainland China questions

Bitcoin supporters are eagerly anticipating the approval of an Exchange-Traded Fund (ETF) in Hong Kong as a potential major factor driving up prices. According to Matrixport’s recent assessment, there could be significant interest from Chinese investors totaling around $25 billion if such funds become available.

More recently, Wu Blockchain announced that the issuers have stated that funds originating from the Chinese mainland are restricted from buying the newly launched ETFs.

CoinDesk reached out to HKEX, the organization overseeing Hong Kong’s stock market, but they declined to provide a comment regarding the issue.

Bitcoin ETFs in the United States have experienced extraordinary inflows during their initial stages, yet the recent development of such ETFs in Hong Kong is beneficial for the industry as a whole. However, the Hong Kong ETF market isn’t substantial enough for this launch to create a significant ripple effect.

“Matt Hougan, Bitwise Asset Management’s CIO, views Hong Kong ETFs favorably but not as a groundbreaking development,” (X post).

According to Eric Balchunas, Bloomberg ETF analyst, the size of the U.S. and Hong Kong ETF markets varies significantly. He suggested that the inflows may not exceed $1 billion in total due to these differences in scale. Although $1 billion is a substantial amount, it is insignificant compared to the $25 billion forecast and the billions pulled in by U.S.-based Bitcoin ETFs over the past three months.

Institutional investors with a focus on Hong Kong ETFs could benefit greatly from this setup, according to QCP’s assessment in their latest note to CoinDesk. These investors are restricted to trading cryptocurrencies through ETFs and will now have extended trading opportunities due to the inclusion of Hong Kong markets in U.S. trading hours.

Although institutional ownership of bitcoin ETFs has grown, it remains relatively insignificant compared to the larger investment landscape. Based on SEC filings, fund managers have yet to substantially increase their holdings in these funds. Consequently, while this development is valid, it’s not likely to be the major shift or game-changer that many anticipated.