Chinese fund manager seeks Hong Kong Bitcoin ETF approval

Hong Kong, a world-renowned financial center and China’s gateway to overseas investment, is ready to give the green light to a spot Bitcoin exchange-traded fund (ETF) linked to Bitcoin (BTC).

According to Coindesk, Singapore-based crypto service provider Matrixport noted that this investment vehicle could unlock up to $25 billion in demand from Chinese investors through the Southbound Stock Connect scheme, which allows qualified mainland Chinese investors to buy in Qualifying stocks listed in Hong Kong.

Matrixport’s report suggests that the approval of a Hong Kong-listed Bitcoin spot ETF could attract billions of dollars in funding from mainland investors, as the Southbound Connect scheme could facilitate up to 500 billion yuan (HK$540 billion and US$70 billion) in transactions annually . Based on potential available capacity, Matrixport estimates that up to HK$200 billion ($25 billion) could flow into these Bitcoin ETFs.

The Shanghai-Hong Kong Stock Connect scheme allows mainland Chinese investors to buy up to HK$540 billion worth of Chinese stocks every year. However, data from 360MarketIQ shows that capital flows have been HK$100 to 200 billion (US$15 billion to US$25 billion) below the limit over the past three years, and there are still potential quotas for Bitcoin ETF investment flows if approved without restrictions.

Bitcoin ETF enters China

It is unclear whether the upcoming spot ETF will be available for mainland Chinese investors to invest. However, the recent surge in gold prices in mainland China points to interest in diversifying into alternative assets. The tightly controlled yuan has fallen nearly 2% against the dollar, extending a two-year slide as the economy slows and the trade surplus shrinks.

Nick Ruck, chief operating officer of ContentFi Labs, pointed out that mainland funds have been applying to issue spot Bitcoin ETFs through their Hong Kong subsidiaries, which, if approved, may give qualified mainland investors more opportunities to buy Bitcoin.

According to Nikkei Asia, top Chinese fund management companies such as Harvest Global Investments, the Hong Kong branch of Bosera Asset Management, and Value Partners, a subsidiary of Chinese securities firm GF Holdings, have applied for ETFs in Hong Kong.

The United States recently approved nearly a dozen spot ETFs, which have amassed $12 billion in investor funds and pushed Bitcoin to a new record high above $73,000. If Hong Kong follows suit, it could result in a massive inflow of funds from Chinese investors into the cryptocurrency market.

In the United States, local regulators approved a Bitcoin spot ETF in January after a long battle by supporters. In mid-March, these ETFs reported single-day inflows of more than $1 billion, but have seen significant outflows following recent market setbacks.