Bitcoin ETFs in Hong Kong Unavailable for Mainland China Investors

According to data analyst Jack Wang from Bloomberg, the recent approval of spot Ethereum and Bitcoin ETFs in Hong Kong will not provide market access to investors from mainland China.

Following this regulatory approval, three Chinese asset managers, namely China Asset Management, Harvest Global Investments, and Bosera, have launched their spot crypto ETFs through their Hong Kong subsidiaries on April 30. This move represents a significant advancement in the expansion of cryptocurrency investment options in Hong Kong, although it remains unavailable to the mainland Chinese market.

It is important to note that these financial entities will not be able to offer Bitcoin or Ether exposure to investors in mainland China, despite their close ties with ETF issuers. During a Bloomberg webinar on April 24, Wang emphasized that mainland Chinese citizens are prohibited from participating in these offerings. This exclusion is based on a directive issued by the Chinese State Council in September 2021, which restricts financial institutions from creating accounts, transferring funds, or providing clearing services for crypto-related transactions.

Wang shared a personal anecdote about his attempt to engage with a futures-based crypto ETF listed in Hong Kong, revealing that brokers rejected his trade attempt. He emphasized that Chinese investors will remain completely isolated from this product in the short term. Additionally, Wang firmly believes that the introduction of spot Ether and Bitcoin ETFs in Hong Kong will not have a positive impact on the regulatory stance in mainland China or open the cryptocurrency market to Chinese investors. He stated that such a change is “100% not going to happen.”

Thomas Zhu, the head of digital assets at China Asset Management, also known as China AMC, acknowledged that the possibility for mainland Chinese investors to access crypto ETFs in Hong Kong depends on potential future regulatory changes.

In an interview, Zhu mentioned that regulators from mainland China and Hong Kong have collaborated since 2014 to establish the Mainland-Hong Kong Stock Connect. This initiative enables mainland investors to directly trade eligible stocks and ETFs listed in Hong Kong, demonstrating a broader trend towards increased financial integration between the two regions.

Meanwhile, optimism is growing within the financial community as Hong Kong prepares for the introduction of spot Bitcoin ETFs. Bloomberg analyst James Seyffart highlighted the substantial difference in scale between the American and Hong Kong ETF markets. The U.S. ETF market holds assets worth nearly $9 trillion, while Hong Kong’s entire ETF market is valued at approximately $50 billion. In comparison, mainland China’s ETF market is considerably larger at around $325 billion.

Despite the challenges faced by the broader market and China’s stringent regulations, Hong Kong is positioning itself as a significant hub for the cryptocurrency market. Recently, Hong Kong has taken steps to allow retail investors to trade cryptocurrencies and has granted exchange licenses to companies like HashKey and OSL Digital Securities, signaling a strong institutional embrace of cryptocurrency under regulated conditions.

Furthermore, the Hong Kong Securities and Futures Commission is finalizing rules that would enable retail investors to trade major cryptocurrencies such as Bitcoin and Ether on licensed exchanges. This initiative reflects Hong Kong’s contrasting approach to mainland China, where crypto-related transactions remain strictly prohibited.

While mainland China maintains a restrictive stance on cryptocurrencies, banning crypto exchanges and all related trading activities since 2017, Hong Kong’s progressive regulations not only boost its local market but also have the potential to set a precedent or act as a testing ground for future policies in China.