Richard Byworth, managing partner of SyzCapital, has sparked rumors suggesting that Hong Kong-listed Bitcoin ETFs could soon be available to mainland Chinese investors. Byworth’s remarks 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 declared, “I just came back from Hong Kong. There are discussions that the ETF could be added to Stock Connect. The implications are absolutely huge (this basically means mainland money can buy it).” This statement follows a dialogue initiated by Samson Mow, who commented on the impressive initial performance of the ChinaAMC Bitcoin ETF, which gathered $121 million in its market. first day of trading.
Will Bitcoin ETF in Hong Kong open up to mainland Chinese?
Mow’s statement: “I think you should be a little more optimistic” reflects an optimistic view of the future of Bitcoin ETF in Hong Kong. To further the discussion, Brian HoonJong Paik, co-founder and COO at SmashFi, Express his views on the financial and socio-economic motivations that could drive mainland Chinese interest in Hong Kong Bitcoin ETFs.
He highlighted the large amount of Chinese wealth stuck in real estate, with around 100 million homes empty, underscoring the urgent 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 alleviate social unrest,” Paik said.
Paik also addressed the widely held misconception that mainland Chinese investors are currently not allowed to invest in ETFs available on the Hong Kong Stock Exchange. He explained that several existing financial agreements already facilitate a significant flow of capital from the mainland to Hong Kong markets.
The Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect are prominent examples, allowing investors to trade stocks across the border, although regulated by a daily trading quota.
Additionally, the Qualified Domestic Institutional Investor (QDII) program allows Chinese institutional investors to participate in overseas markets, including those in Hong Kong. Additionally, Chinese residents have the option to invest through brokerage firms that operate legally in both territories, thereby navigating the complex regulatory landscape that governs foreign investments.
Another key framework, Mutual Fund Recognition (MRF) between Hong Kong and Mainland China, facilitates the distribution of eligible mutual funds in the respective markets through a streamlined approval process. According to Paik, excluding Bitcoin ETFs from these deals would likely cause significant discontent and could disrupt the investment landscape in both regions.
“These mechanisms make the Hong Kong Stock Exchange one of the most accessible overseas markets for Chinese investors, promoting financial integration between Mainland and Hong Kong. Excluding just the Bitcoin ETF would likely result in significant repercussions among institutional and retail investors in China and Hong Kong,” he said.
Notably, Singapore-based Matrixport already predicted in mid-April that the approval and subsequent inclusion of Hong Kong-listed Bitcoin Spot ETFs in the Southbound Stock Connect could attract $25 billion in capital. This program facilitates up to 500 billion RMB ($70 billion) per year in transactions.
At press time, BTC was trading at $64,172.
Featured image created with DALL·E, chart from TradingView.com
