Junk off Hong Kong. Image: “The Duk Ling” by Vin Crosbie via flickr.com. License: Creative Commons

Several asset managers have received the OK for Bitcoin and Ether ETFs. Does this open the doors to the restrictive and vast Chinese financial system?

The Hong Kong arm of China Asset Management, one of China’s largest asset managers, today received approval from Hong Kong’s securities regulator to offer “virtual asset management services” to investors.

The company now plans to issue spot ETFs for Bitcoin and Ether. To achieve this, it has teamed up with OSL Digital Security, a licensed digital asset management platform from Hong Kong. The Hong Kong securities regulator also cleared two crypto spot ETFs from Harvest Global Investment. Bosera Asset and HashKey Capital have also received “conditional” approval for their crypto ETFs, but do not mention the specific conditions.

All in all, this sounds like an “omnibus” clearance from Hong Kong’s financial regulator, similar to that in the US, but with a broader reach beyond Bitcoin to basically include any type of cryptocurrency.

So far, however, there are apparently only spot ETFs for Bitcoin (BTC) and Ether (ETH). The Ether ETFs in particular are awaited with some excitement. Because while investors can already buy into Bitcoin through shares of miners, at least indirectly, there are no comparable vehicles for Ether.

The Hong Kong Stock Exchange is one of the fastest growing trading platforms in Asia and one of the largest in the world. It lists the securities of more than 2,500 companies with a combined market capitalization of more than 47 trillion Hong Kong dollars, which is equivalent to around 5 trillion US dollars.

While mainland China takes a restrictive approach, Hong Kong – which is part of China but enjoys a type of administrative autonomy – is positioning itself as significantly more crypto-friendly. It was only in the summer of 2023 that Hong Kong presented its rules for crypto licenses, through which trading platforms can be officially approved. For many Chinese companies, liberal Hong Kong has long been the first port of call for issuing shares; Almost every Chinese financial company has some kind of subsidiary in Hong Kong.

Through the Stock Connect program, investors in both the Mainland and Hong Kong can access the same pool of stocks. This allows, for example, users of the Shanghai and Shenzhen stock exchanges to buy stocks that are listed on the Hong Kong stock exchange. It is, of course, questionable whether this will also make Bitcoin and Ether ETFs accessible to Chinese investors once they are listed on the Hong Kong stock exchange.

However, due to the generally close interconnectedness, asset managers and banks in China should still have the direct or indirect opportunity to include crypto ETFs in their portfolio. The now approved spot ETFs in Hong Kong could open the door to the financial system of the world’s second largest economy. Since China also makes it much more difficult for its investors to invest in cryptocurrencies than the USA, the Hong Kong ETFs could have an enormous effect that is difficult to overestimate.

Source: https://bitcoinblog.de/2024/04/15/hongkonger-finanzaufischt-gibt-gruenes-licht-fuer-krypto-etfs/

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