Hong Kong, an economic powerhouse and gateway for Chinese investments abroad, is poised to surge in Bitcoin (BTC) demand if a spot Bitcoin exchange-traded fund (ETF) receives approval. This development could unleash a massive $25 billion inflow from mainland China, facilitated by the Southbound Stock Connect program.
The Southbound Stock Connect program bridges the gap for qualified mainland Chinese investors, allowing them to access eligible shares listed on the Hong Kong Stock Exchange. Matrixport, a crypto services provider based in Singapore, highlights the program’s ability to facilitate “up to 500 billion RMB (HK$540 billion and $70 billion) in annual transactions.
While the exact figure remains an estimate, Matrixport presents a “blue sky” scenario. This scenario assumes that the average unused quota from the Southbound Stock Connect program over the past three years would be directed into the spot ETF. This optimistic outlook translates to a potential $25 billion windfall for Hong Kong Bitcoin ETFs, expressed in Hong Kong dollars as HK$200 billion.
$15-25 Billion Await Bitcoin ETF Investments in Hong Kong
360MarketIQ reports reveals that the Southbound Stock Connect program has an annual quota allowing mainland Chinese investors to purchase Hong Kong stocks worth HK$540 billion. However, the actual utilization over the past three years fell short, reaching only HK$450 billion, HK$400 billion, and HK$320 billion, respectively. This leaves an untapped quota ranging from HK$100 billion to HK$200 billion ($15 billion to $25 billion) annually.
Matrixport clarifies that potentially HK$100 billion to HK$200 billion remains available for Bitcoin ETF investments if approval comes without restrictions. This unutilized capacity offers a remarkable opportunity for Bitcoin investment through the proposed Hong Kong ETF.
The potential Bitcoin ETF approval aligns with China’s growing interest in diversifying its financial landscape, especially as the tightly controlled renminbi has weakened nearly 2% against the U.S. dollar over the past two years. This concerning trend is driven by economic slowdown and a shrinking trade surplus.
China’s RMB is at a 17-year low versus the USD. Matrixport notes a demand for diversification, emphasizing the Chinese central bank’s recent surge in gold purchases. This highlights China’s strategic shift towards alternative assets, and Bitcoin appears poised to benefit significantly.
Mainland Funds Eager to Participate
The chance of a Bitcoin exchange-traded fund (ETF) listed in Hong Kong is attracting significant interest from mainland China. Nick Ruck, Chief Operating Officer of ContentFi Labs based in Hong Kong, said:
“Mainland-based funds have been applying to issue spot bitcoin ETFs through their Hong Kong subsidiaries. If approved, this could allow qualified mainland investors greater access to bitcoin.”
Reports from Nikkei Asia confirm this trend, revealing applications from prominent firms like Harvest Global Investments (the Hong Kong arm of Bosera Asset Management) and Value Partners (owned by Chinese brokerage GF Holdings), highlight the eagerness of mainland Chinese institutions to participate in the potential Bitcoin investment opportunities.
With the United States granting approval to approximately a dozen spot Bitcoin ETFs four months ago, the trajectory for a comparable endorsement in Hong Kong appears increasingly evident. The remarkable achievement of U.S. ETFs, amassing an astounding $12 billion in investor funds and propelling Bitcoin to unprecedented heights surpassing $73,000, establishes a persuasive precedent for this endeavor.
A Hong Kong ETF, coupled with the Stock Connect program’s reach into mainland China, could catalyze a new era for Bitcoin in Asia. An inflow of $25 billion from mainland investors would undoubtedly generate significant momentum, further mainstreaming Bitcoin and solidifying its status as a global asset class.
Related Reading | TON-Hashkey Alliance Expands Cryptocurrency Access Globally Amid Market Surge
