Comments from Richard Byworth, managing partner at SyzCapital, have sparked rumors that Bitcoin ETFs listed in Hong Kong may soon be available to mainland investors. Byworth’s tweets on X, formerly known as Twitter, highlighted discussions about the possibility of integrating these ETFs into the Stock Connect system. Such an integration could pave the way for mainland funds to flow into these digital asset funds.

“I just got back from Hong Kong. There are rumors that this ETF may be added to the Shanghai-Hong Kong Stock Connect. The implications are absolutely huge (basically meaning mainland funds can buy it)”, said Byworth. This statement came after Samson Mow made a report on the outstanding debut of the Huaxia Bitcoin ETF, which attracted $121 million in funds on its first day of trading.

Will Hong Kong Bitcoin ETF be opened to mainland China?

Mow's statement, "I think you should be more optimistic," reflects his positive expectations for the future development of Hong Kong Bitcoin ETFs. At the same time, Brian HoonJong Paik, co-founder and COO of SmashFi, also shared his insights on the financial and socio-economic dynamics that may inspire mainland China's interest in Hong Kong Bitcoin ETFs.

He highlighted the huge wealth locked up in Chinese real estate, with about 100 million vacant homes, noting the need for alternative investment opportunities to stabilize the socioeconomic landscape. “It’s only a matter of time. The CCP needs an alternative asset to mitigate social unrest,” Paik said.

Brian HoonJong Paik pointed out that China has a lot of wealth locked up in the real estate market, with about 100 million vacant homes, suggesting that other types of investment opportunities are urgently needed to balance the socioeconomic landscape. Paik believes: "It is only a matter of time before China needs to find alternative assets to mitigate social unrest."

Paik also addressed a common misconception that investors from mainland China cannot currently invest in ETFs listed on the Hong Kong Stock Exchange. He explained that there are actually several financial arrangements that have facilitated strong capital inflows from the mainland into the Hong Kong market.

The Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect are typical examples, allowing investors to trade stocks across borders, albeit subject to regulatory limits on daily trading quotas.

Then, the Qualified Domestic Institutional Investor (QDII) program allows Chinese institutional investors to participate in overseas markets, including the Hong Kong market. In addition, mainland Chinese residents can choose to invest through brokerage firms that legally operate in both regions, thereby navigating the complex regulatory environment governing foreign investments. This program provides a channel for Chinese institutional investors to invest in financial products in overseas markets such as Hong Kong within a specified quota and regulatory framework.

Another important framework is the mutual recognition of funds (MRF) mechanism between Hong Kong and mainland China, which facilitates the distribution of eligible mutual funds in each other's markets through a simplified approval process. According to Paik, if the Bitcoin ETF is excluded from the financial cooperation arrangement between Hong Kong and mainland China, this may cause greater dissatisfaction and may have an impact on the stability of the investment markets in both regions.

Paik said: "These mechanisms make the Hong Kong stock market one of the most accessible foreign markets for Chinese investors, promoting financial integration between Hong Kong and the mainland. At the same time, excluding only Bitcoin ETFs may cause significant repercussions among institutional and retail investors in China and Hong Kong."

It is worth noting that Singapore-based Matrixport has predicted in mid-April that once the Hong Kong-listed Bitcoin spot ETF is approved and included in the Hong Kong-Hong Kong Stock Connect trading interconnection mechanism, it may attract up to US$25 billion in capital inflows. It is said that the program can support up to 500 billion yuan (about US$70 billion) in trading volume per year. #香港比特币ETF #大陆投资者