Bloomberg: HK Bitcoin ETFs Excludes Mainland China

Bitcoin ETFs in Hong Kong exclude mainland China, Bloomberg reports

It appears that mainland Chinese investors will not be able to participate in the newly approved spot bitcoin ETFs listed in Hong Kong, according to analysts at Bloomberg Intelligence, further dampening enthusiasm for the funds. The news comes at a time when China is already one of the most restrictive countries in the world when it comes to cryptocurrencies, having prohibited trading and mining of digital currency in 2021.

Bloomberg reported that Hong Kong regulators approved the ETF's launch on Monday, meaning new money can now be invested in Bitcoin. Instead of filing a formal notice of approval with the SEC, the issuers, ChinaAMC, Harvest Global, and Bosera International, announced their approval on their websites.

Mainland China questions

The approval of the Hong Kong ETF is one of the following significant catalysts for bitcoin bulls. Last week, Matrixport reported that Chinese investors could bid up to $25 billion for the funds. However, Wu Blockchain reported this week that the issuers told them that "southbound funds" (i.e., funds from mainland China) would not be allowed to buy the new ETFs

Hong Kong Exchange Group (HKEX), which operates the stock exchange in Hong Kong, did not reply to CoinDesk's request for comment.

In the US, bitcoin spot ETFs have seen record-setting inflows in their first months of trading. While Hong Kong's new ETFs are undoubtedly good news for the industry, the city's ETF market isn't big enough for the first launch to have a significant effect.

"ETFs in Hong Kong are positive but not game-changing," Matt Hougan, chief investment officer at Bitwise, wrote on X.

The scale of the ETF markets in the US and Hong Kong is very different, as noted in a note from a Bloomberg ETF analyst on X. Due to these differences, flows are likely to be at most $1 billion. $1 billion may sound like a lot, but it pales in comparison to the prediction of $25 billion, not to mention the tens of billions that U.S bitcoin ETFs have pulled in in the last three months alone.

QCP, a Singapore-based ETF provider, suggested to CoinDesk in a note that institutional investors, who are limited to trading crypto through ETFs, could take advantage of the additional trading hours that Hong Kong trading will bring when it joins the US market.

However, institutional participation in bitcoin ETFs is still relatively small, and to date, SEC filings show that fund managers have yet to make significant investments in bitcoin ETFs. So, even though this use case is legitimate, it is unlikely that the China-size movement that was anticipated will be seen.