Richard Byworth, managing partner at SyzCapital, has ignited rumors suggesting that Hong Kong-listed bitcoin ETFs could soon be accessible to mainland Chinese investors. Byworth's statements on x, formerly known as twitter, highlight ongoing discussions about the possibility of integrating these ETFs into the Stock Connect system. This integration could pave the way for a massive wave of capital inflows from the continent into these digital asset funds.
Byworth twitter.com/RichardByworth/status/1785585590311817475″ target=”_blank” rel=”noopener nofollow”>fixed, “I just returned from Hong Kong. There is talk that the ETF could be added to stock connect. The implications of this are absolutely huge (it basically means that mainland money can buy it).” This statement followed a dialogue started by Samson Mow, who commented on the impressive early performance of the ChinaAMC bitcoin ETF, which raised $121 million on its first day of trading.
Will bitcoin ETF in Hong Kong open to mainland Chinese?
Mow's statement, “I think you guys should be a little more optimistic,” reflects an optimistic outlook on the future of bitcoin ETFs in Hong Kong. To add depth to the discussion, Brian HoonJong Paik, co-founder and COO of SmashFi, twitter.com/brianhoonjong/status/1779808735927636065″ target=”_blank” rel=”noopener nofollow”>voiced their views on the financial and socioeconomic motivations that could drive mainland Chinese interest towards Hong Kong bitcoin ETFs.
He highlighted the vast amount of Chinese wealth locked up in the real estate sector, with approximately 100 million empty homes, signaling a dire need for alternative investment opportunities to stabilize the socio-economic landscape. “It's just a matter of time. The CCP needs an alternative asset to mitigate social unrest,” Paik said.
Paik also addressed the widespread misconception that mainland Chinese investors currently cannot invest in ETFs available on the Hong Kong Stock Exchange. He explained that several existing financial arrangements already facilitate a strong flow of mainland capital into Hong Kong markets.
The Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect are notable examples, allowing investors to trade stocks across the border, albeit regulated by a daily transaction fee.
Additionally, the Qualified Domestic Institutional Investor (QDII) scheme allows Chinese institutional investors to participate in overseas markets, including those in Hong Kong. Additionally, Chinese residents have the option of investing through brokerage firms that operate legally in both territories, navigating the complex regulatory landscape governing foreign investments.
Another critical framework, the Mutual Recognition of Funds (MRF) between Hong Kong and mainland China, facilitates the distribution of eligible mutual funds in each other's markets through a simplified approval process. According to Paik, excluding bitcoin ETFs from these deals would likely spark significant discontent and could disrupt the investment landscape in both regions.
“These mechanisms make the Hong Kong stock market one of the most accessible overseas markets for Chinese investors, promoting financial integration between the mainland and Hong Kong. Excluding just the bitcoin ETF would likely cause significant repercussions among institutional and retail investors in both China and Hong Kong,” he stated.
Notably, Singapore-based Matrixport already projected in mid-April that the approval and subsequent listing of Hong Kong-listed bitcoin Spot ETFs on Southbound Stock Connect could attract $25 billion of capital. This program facilitates up to 500 billion RMB ($70 billion) per year in transactions.
At the time of publication, btc was trading at $64,172.
Featured image created with DALL·E, chart from TradingView.com
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