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

Analyst expectations of as much as $25 billion in fresh demand may have to be tempered.

AccessTimeIconApr 17, 2024 at 3:47 p.m. UTC
Updated Apr 17, 2024 at 3:49 p.m. UTC
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  • Mainland Chinese investors won't likely get the green light to buy the newly launched Hong Kong-listed spot bitcoin ETFs, Bloomberg Intelligence analysts reported.
  • This isn't a surprise given China's restrictive stance on crypto.
  • Hong Kong's spot bitcoin ETFs are a positive for the industry overall, but given its relatively small market may not have a huge impact. Bloomberg analysts expects roughly $1 billion inflows in the first two years.

Investors in mainland China likely won't be allowed to buy into the newly approved Hong Kong-listed spot bitcoin ETFs, analysts at Bloomberg Intelligence reported, weakening excitement over the funds even further.

The report isn't a huge surprise given that China has one of the globe's most restrictive stances on crypto after having banned the trading and mining of tokens in the country in 2021.

Hong Kong regulators supposedly approved the launch of ETFs on Monday, opening the gates for new money being poured into bitcoin. Issuers include ChinaAMC, Harvest Global and Bosera International. The approval was announced by the issuers themselves, not the Securities and Futures Commission (SFC), Hong Kong's securities regulator, who has maintained radio silence.

Mainland China questions

Bitcoin bulls have been looking to Hong Kong ETF approval as perhaps the next big catalyst for higher prices. Indeed, Matrixport last week suggested the funds could see as much as $25 billion in demand from Chinese investors.

Earlier this week, though, Wu Blockchain, reported that the issuers said "southbound funds," i.e. money from mainland China, will not be allowed to purchase the new ETFs.

HKEX, the firm that runs Hong Kong's stock exchange, did not respond to a request for comment on the matter from CoinDesk.

The spot bitcoin ETFs in the U.S. have seen unprecedented inflows within the first few months of existence, but while the new development in Hong Kong is certainly a positive for the industry overall, the city’s ETF market itself isn’t big enough for the launch to have a tremendous impact.

“Hong Kong ETFs are a positive but not a game-changer,” said Bitwise chief investment officer Matt Hougan in a post on X.

As Bloomberg ETF analyst Eric Balchunas pointed out on X, the scale of the U.S and Hong Kong ETF markets are remarkably different, and he argued that flows are likely not going to surpass $1 billion combined given the differences in scale. While $1 billion is still a significant number, it pales against that $25 billion prediction, not to mention the $10s of billions pulled in by the U.S.-based bitcoin ETFs over the past three months.

The best use case for the Hong Kong ETFs might be for institutional investors – who can only trade crypto via ETFs – to get additional trading hours as Hong Kong trading is added to the U.S., Singapore-based QCP said in a recent note to CoinDesk.

But institutional holdings of bitcoin ETFs, however, are pretty small in the grand scheme of things, with SEC filings to this point showing that fund managers haven't made big moves into these funds. So even this use case – while legit – is unlikely to be the China-sized move everyone expected.

Edited by Stephen Alpher.


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Helene Braun

Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk's Markets Daily show. Helene is a graduate of New York University's business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.

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