According to Bloomberg data analyst Jack Wang, the recent approval in Hong Kong for spot Ethereum and Bitcoin ETFs (exchange-traded funds) will not extend market access to investors from mainland China.
Following this regulatory green light, three Chinese asset managers—China Asset Management, Harvest Global Investments, and Bosera—launched their spot crypto ETFs via their Hong Kong subsidiaries on April 30. This development marks a significant step in the expansion of cryptocurrency investment vehicles in Hong Kong, although it remains inaccessible to the mainland Chinese market.
Bitcoin ETFs Won’t Have A Positive Impact On The Regulatory Environment In Mainland China
Despite the close ties between ETF issuers and mainland China, these financial entities will not be able to offer Bitcoin or Ether exposure to investors within that jurisdiction. During a Bloomberg webinar on April 24, which focused on Hong Kong’s approval of spot crypto ETFs, Wang emphasized that mainland Chinese citizens are barred from participating in these offerings. This exclusion is based on a directive from the Chinese State Council issued in September 2021, prohibiting financial institutions from creating accounts, transferring funds, or providing clearing services for crypto-related transactions.
Wang also shared an anecdote about his personal attempt to engage with a futures-based crypto ETF listed in Hong Kong, explaining that brokers outright rejected his trade attempt. He underscored that, at least in the short term, Chinese investors will remain completely isolated from this product. Moreover, Wang expressed a firm belief that the introduction of spot Ether and Bitcoin ETFs in Hong Kong would not positively influence the regulatory stance in mainland China nor would it open the cryptocurrency market to Chinese investors, with him stating that such a change is “100% not going to happen.”
Thomas Zhu, head of digital assets at Hong Kong-based China Asset Management, also known as China AMC, noted that the possibility for mainland Chinese investors to access crypto ETFs in Hong Kong hinges on potential future regulatory changes.
Bitcoin ETFs In The United States Have More Assets Than All ETFs In Hong Kong
Since 2014, regulators from Mainland China and Hong Kong have worked together to establish the Mainland-Hong Kong Stock Connect, as Zhu, a spokesperson, informed in an interview. This initiative allows Mainland investors to directly trade eligible stocks and ETFs listed in Hong Kong. This collaborative effort underscores a broader trend toward greater financial integration between the two regions.
Meanwhile, as Hong Kong gears up for the introduction of spot Bitcoin ETFs, optimism is mounting within the financial community. Bloomberg analyst James Seyffart highlighted the stark contrast in scale between the American and Hong Kong ETF markets in a recent post.
Seyffart pointed out that while the U.S. ETF market boasts nearly $9 trillion in assets, Hong Kong’s entire ETF market is valued at approximately $50 billion, with Mainland China’s ETF market considerably larger at around $325 billion.
Hong Kong Is Still 1000 Steps Ahead Of Mainland China When It Comes To Cryptos
Hong Kong is positioning itself as a significant hub for the cryptocurrency market despite broader market challenges and China’s stringent regulations. Recently, Hong Kong has moved to open up its crypto trading to retail investors and has granted the first exchange licenses to companies like HashKey and OSL Digital Securities, signaling a strong institutional embrace of cryptocurrency under regulated conditions.
NEW: 🇭🇰Hong Kong #Bitcoin ETFs launching in 4days.
Chinese investors with Hong Kong residence permits will be allowed to buy shares in these Bitcoin ETFs. pic.twitter.com/Px1c5EsMz9
— Bitcoin Archive (@BTC_Archive) April 26, 2024
Furthermore, the Hong Kong Securities and Futures Commission is finalizing rules that would allow retail investors to trade in major cryptocurrencies such as Bitcoin and Ether on licensed exchanges. This initiative reflects Hong Kong’s contrasting approach to mainland China, where crypto-related transactions remain strictly prohibited.
While mainland China maintains a prohibitive stance on cryptocurrencies, banning crypto exchanges and all related trading activities since 2017, Hong Kong’s progressive regulations serve not only to boost its local market but may also set a precedent or act as a test bed for potential future policies in China.
