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Hong Kong, a prominent global financial hub and a gateway for Chinese overseas investments, is poised to green-light a spot Bitcoin exchange-traded fund (ETF) linked to Bitcoin (BTC).
According to a Coindesk report, Singapore-based crypto services provider Matrixport noted that this investment vehicle could potentially unlock up to $25 billion in demand from Chinese investors through the Southbound Stock Connect program, which allows qualified mainland Chinese investors to access eligible shares listed in Hong Kong.
Matrixport’s report suggests that the approval of Hong Kong-listed Bitcoin Spot ETFs could attract several billion dollars of capital from mainland investors, as the Southbound Connect program facilitates up to 500 billion RMB (HK$540 billion and $70 billion) per year in transactions. Based on the potential available capacity, Matrixport estimates that up to HK$200 billion (US$25 billion) could be channeled into these Bitcoin ETFs.
The Stock Connect program allows mainland Chinese investors to purchase up to HK$540 billion worth of Chinese stocks annually. However, data from 360MarketIQ reveals that flows in the past three years have fallen short of the limit by HK$100 to HK$200 billion ($15 billion to $25 billion), leaving a potential quota for Bitcoin ETF investment flows if the approval occurs without restrictions.
Bitcoin ETF’s reach into China
It remains unclear whether the forthcoming spot ETFs will be accessible to mainland Chinese investors. However, mainland China’s recent surge in gold prices suggests an interest in diversifying into alternative assets. The tightly controlled Chinese renminbi has declined nearly 2% against the U.S. dollar, extending its two-year losing streak due to economic slowdown and shrinking trade surplus.
Nick Ruck, COO of ContentFi Labs, noted that mainland-based funds have been applying to issue spot Bitcoin ETFs through their Hong Kong subsidiaries, which could allow qualified mainland investors greater access to Bitcoin if approved.
According to Nikkei Asia, top Chinese fund managers such as Bosera Asset Management’s Hong Kong arm, Harvest Global Investments, and Value Partners, owned by Chinese brokerage GF Holdings, have applied for ETFs in Hong Kong.
The U.S. recently approved nearly a dozen spot ETFs, which have amassed $12 billion in investor funds and pushed Bitcoin to new record highs above $73,000. If Hong Kong follows suit, it could lead to a significant inflow of capital from Chinese investors into the cryptocurrency market.
In the United States, the local regulators approved the Bitcoin spot ETF back in January after a prolonged fight by proponents. Those ETFs saw major outflows following a recent market setback after previously reporting over $1 billion of inflows in a single day back in mid-March.
