Investors in China could soon have a regulated access route to Bitcoin and Ethereum, the two largest cryptocurrencies on the market, through the cross-border Stock Connects system, which has linked the stock markets of Hong Kong and mainland China since 2014.
Richard Byworth, Managing Partner at SyzCapital, has been spreading rumours on X (formerly Twitter) about the possible integration of the Hong Kong Stock Exchange-listed Bitcoin and Ethereum spot ETFs into Stock Connects since April 30.
Byworth says there are talks in Hong Kong about this possible integration, which could create an onramp for mainland Chinese investors to enter the Bitcoin and Ethereum market in a regulated manner.
According to Byworth, the implications of the potential integration of Hong Kong's cryptocurrency spot ETFs into the cross-border Stock Connects system are “absolutely huge”, Because it basically means that Chinese investors will be able to directly acquire shares in these exchange-traded funds.
Possible opening of Bitcoin and Ethereum spot ETFs to mainland Chinese investors
Although these are just rumors at the moment, experts say it is only a matter of time before mainland Chinese investors enter the Bitcoin and Ethereum spot ETF market.
Experts believe that Hong Kong's significant progress in cryptocurrencies serves as an experiment and a way for crypto assets, which were banned in China in 2021, to return to the country. It is also thought that the re-entry of cryptocurrencies in China is necessary to diversify and expand the options for investors in the region.
Brian HoonJong Paik, co-founder and COO of SmashFi, believes that cryptocurrencies could help mitigate the effects of the real estate crisis in the country. He commented that “it's just a matter of time” Bitcoin and Ethereum ETFs to enter the mainland China market, noting that “70% of China's wealth is in real estate and there are now 100 million empty houses”.
“The CCP (Chinese Communist Party) needs an alternative asset to mitigate social unrest”, emphasized the expert via X, in response to Byworth's comments on the integration of Hong Kong cryptocurrency ETFs into Stock Connects.
What is Stock Connects?
Stock Connects is a cross-border system that connects the stock markets of Hong Kong and Mainland China, allowing investors from both regions to trade stocks listed on these financial markets.
FundsPeople, a community of investment professionals, highlighted that this system allows access to and trading in more than 560 shares listed in Shanghai, without the need to request permission from the Chinese authorities or have a license to do so.
Cryptocurrency enthusiasm returns
Rumors about the possible integration and opening of cryptocurrency spot ETFs to investors in China are renewing interest in the crypto market. Samson Mow, CEO of JAN3 and former chief strategy officer at Blockstream, commented that people should be a little more optimistic about the current development of Bitcoin and Ethereum spot ETFs.
Mow cited reports of cryptocurrency exchange-traded funds trading in Hong Kong, which exceeded $290 million dollars on its first day on the market, which was considered a success considering the size of this market. However, on May 6, these cryptocurrency exchange-traded funds recorded their first day of outflows, which can also be considered a sign of cooling investor interest in these investment products.
On this, Bitcoin evangelist Anthony Pompliano commented that Asian investors may not be as interested in spot cryptocurrency ETFs, as they have already allocated to native assets.
Hong Kong advances in crypto industry innovation
On the other hand, as part of its constant advances in the cryptocurrency industry and blockchain technology, the Hong Kong Monetary Authority (HKMA) announced today the establishment of Project Ensemble Architecture Community, a working group that will focus on shaping new standards to accelerate the development of Hong Kong’s tokenization market.
The standards that are developed through this group, according to reported The HKMA will support interoperability between wholesale CBDC (wCBDC), tokenized money and tokenized assets. The agency also highlighted that, as part of the Project Ensemble Architecture Community, a new regulatory sandbox will be launched in the middle of this year, designed to facilitate and incentivize further research and testing of tokenization use cases on the blockchain.
Continue reading: BlackRock: Financial Institutions Evaluate Participation in Bitcoin ETF
