After the listing of the Hong Kong cryptocurrency spot ETF, Chinese investors have been prohibited from investing. However, Han Tongli, CEO of China Asset Management Company, one of the first issuers of cryptocurrency spot ETFs in Hong Kong, stated on Thursday that in the future, it is not ruled out that Chinese investors will be able to directly invest in their Bitcoin and Ether spot ETF products through the Shanghai-Hong Kong Stock Connect program.
Wintermute, a market maker, has entered Hong Kong and announced that it will provide liquidity for local Bitcoin and Ethereum spot ETFs.
It has been rumored that China will “lift the ban on cryptocurrencies” within three months, and is the Hong Kong cryptocurrency ETF a precursor?
China and Hong Kong ETF connectivity mechanism was launched in May 2022, allowing Chinese investors to access a range of designated ETFs listed in Hong Kong, as part of a larger-scale Shanghai-Hong Kong Stock Connect program. It is understood that the Shanghai-Hong Kong Stock Connect was launched in 2014 and is a market interconnection program between mainland China and Hong Kong.
If cryptocurrency ETFs can indeed be included in the Shanghai-Hong Kong Stock Connect, it is expected to bring significant confidence and attract a large number of new investors to the market. However, given China’s hostile stance towards cryptocurrencies, some people have doubts about whether this move will be approved. Although individual trading and holding of cryptocurrencies within China still exist in a legal gray area, most commercial cryptocurrency activities are prohibited.
Bitcoin and Ethereum futures ETFs launched in Hong Kong in 2022 have not yet been included in the Shanghai-Hong Kong Stock Connect program.
Optimistic about the scale of Hong Kong’s cryptocurrency ETF reaching twice that of the United States
Hong Kong became the first region in Asia to launch Bitcoin and Ethereum spot ETFs last month. Issuers have heavily promoted advantages such as physical subscription in Hong Kong, but given the background of the Hong Kong ETF market being much smaller than the United States, the trading volume of related ETFs is insignificant compared to the Bitcoin ETF launched in the United States in January.
Han Tongli stated that many people are taking a wait-and-see attitude and doubt Hong Kong’s commitment to the virtual asset industry, which has affected the trading volume of related ETFs. However, he believes that the Hong Kong market has greater potential because Hong Kong is more attractive in Asia and is a “more neutral” region. It is expected that the Hong Kong cryptocurrency ETF may eventually develop to be twice the size of American products.
Han Tongli refused to provide a timetable for achieving this milestone. He stated that it depends on when Hong Kong can establish a complete virtual asset ecosystem. While Hong Kong has already planted the seeds with the launch of ETFs, other products such as stablecoins require more time to obtain regulatory approval.
According to Han Tongli, China Asset Management Company’s current goal is to make its cryptocurrency spot ETF the largest ETF in terms of trading volume in Hong Kong by the end of this year, as the company is preparing to issue ETF-based mortgage financial products.