Hong Kong Poised to Launch Spot Bitcoin and Ethereum ETFs, Trading to Kick Off by April 30th

Hong Kong's conditional approval of spot Bitcoin and Ethereum ETFs sparks anticipation for a potential trading launch by month-end. While no confirmed date is set, industry expert Markus Thielen indicates expectations for April 30 trading commencement. This development follows growing demand for crypto exposure after the U.S. approval of spot Bitcoin ETFs. The success of these Hong Kong ETFs could be influenced by the participation of mainland Chinese investors, as the Shanghai Stock Exchange's southbound connect program allows for a limited quota of purchases by eligible investors.

Hong Kong Poised to Launch Spot Bitcoin and Ethereum ETFs

Analysts Anticipate Trading to Commence by April 30th

Hong Kong's financial sector is on the cusp of a significant development with the impending launch of spot Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs). According to Markus Thielen, the veteran analyst behind 10x Research and former Head of Research and Strategy at Matrixport, trading of these ETFs could commence as early as April 30th.

Conditional Approval Granted

Hong Kong's Securities and Futures Commission (SFC) recently granted conditional approval for a number of Bitcoin and Ethereum ETF applications. China Asset Management, Harvest Global, Bosera, and HashKey are the entities behind these applications.

US Approval Precedes Hong Kong's Move

The approval of spot Bitcoin ETFs in Hong Kong follows a similar move in the United States in January. This development has generated increased demand for crypto asset exposure, fueling the recent bull run in the cryptocurrency market.

Dependence on Mainland Chinese Investors

The success of Hong Kong's ETFs will hinge heavily on the participation of Chinese mainland investors, according to Thielen. The Shanghai Stock Exchange's southbound stock connect mechanism allows qualified mainland investors to access Hong Kong financial assets. However, the daily quota of ¥42 billion may hinder substantial investment.

Quota Limitations

"This program allows mainland investors to buy up to ¥500 billion ($69 billion USD) of Hong Kong-listed stocks annually—or equivalent to HK$540 billion annually," Thielen explained. "During the last three years, the annual spare quota was HK$100 billion to HK$200 billion ($15 billion to $25 billion)."

Unlikely Investment in the Near Term

Thielen believes that Chinese mainland investors will not be able to invest in these ETFs for at least six months. The ETFs are currently ineligible for inclusion in the southbound stock connect program due to regulatory requirements stating that the underlying assets must have been listed for six months.

China's Cryptocurrency Landscape

Despite the ban on crypto trading and mining in China in 2021, the country continues to play a significant role in the cryptocurrency ecosystem. Binance, a leading crypto exchange, processed $90 billion of Chinese transactions in a single month in 2023, accounting for 20% of its global volume.

Hong Kong as a Testing Ground

Experts have suggested that China is using Hong Kong as a "testing ground" for its crypto ambitions, with the launch of these spot ETFs being a key indicator of this strategy.

Cultural Considerations

Thielen notes that ETFs have historically had limited success in Asia due to investors' preference for direct and concentrated bets rather than diversified baskets. However, in this case, the ETFs represent single assets rather than a collection of stocks, which may increase their appeal.

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