If spot exchange-traded funds (ETFs) based on the leading cryptocurrency are launched in Hong Kong, demand from Chinese investors could reach $25 billion, according to a report by CoinDesk citing Matrixport.
“The likely approval of a Hong Kong-listed bitcoin ETF will attract several billion dollars of capital, as market participants from mainland China will take advantage of the Southbound Connect program, which facilitates transactions up to 500 billion yuan (~$70 billion) annually,” analysts stated.
The Southbound Stock Connect allows qualified investors from China to access stocks registered in Hong Kong. The program enables the purchase of securities worth about $70 billion annually, though recently, around $15-25 billion remains unutilized.
Matrixport’s demand estimate assumes that the average unused annual Southbound quota from recent years will be directed towards spot ETFs based on digital gold.
“The Chinese yuan is at a 17-year low against the US dollar. Indeed, there is a need for diversification,” experts noted, highlighting the ongoing gold purchases by the local central bank.
Nick Rak, COO of ContentFi Labs, added that mainland funds are interested in launching ETFs in Hong Kong. If approved, this could provide qualified investors from China broader access to digital gold, he believes.
Preparation for Launch
Fund issuers, working in collaboration with licensed Hong Kong crypto exchange HashKey, have completed the development of the necessary infrastructure for potential spot bitcoin ETFs, reports The Block citing a company statement.
HashKey itself is ready to offer infrastructural support for the instruments and has begun the “integration and functional testing” phase. However, the company has not yet disclosed the names of partner management firms.
Livio Weng, CEO of the trading platform, added that “the launch of spot Ethereum ETFs is expected in the near future,” especially if the staking issue is resolved.
“[The product] could attract more large institutional investors to choose this type of income-generating asset, which may be more appealing than bitcoin-based instruments,” he emphasized.
According to sources from Bloomberg, Hong Kong may approve exchange-traded funds based on the leading cryptocurrency and Ethereum as soon as April 15.
Among the applicants, journalists named Chinese asset manager Harvest Fund Management and Bosera Asset Management (International), which collaborates with HashKey.
Despite investor excitement, the ETF launch timeline could change “at the last minute,” Bloomberg warned.
Back in November 2023, ForkLog reported that the Hong Kong Securities and Futures Commission was considering allowing retail investors access to spot bitcoin ETFs.
Later, a member of the local Legislative Council, Johnny Ng Kit-chong, stated the need for the jurisdiction to “take the initiative” in the implementation of crypto funds.