ETFs
Jan 31, 2024

Bitcoin ETFs in China: What does this mean for investors?

A shift is underway in Bitcoin's global market as China prepares to launch its own Bitcoin ETFs

Bitcoin ETFs in China: What does this mean for investors?

Gradually then suddenly we’re witnessing a monumental shift in the perception and investability of Bitcoin. After a hugely successful launch of Bitcoin ETFs in the United States China is gearing up to launch its own ETF products.

Hong Kong's Regulatory Evolution

An openness to cryptocurrency is a major shift in the region's approach. But this has been brewing for a while.

In mid 2023 Hong Kong Securities and Futures Commission (SFC) showed a willingness to consider applications for spot crypto exchange-traded funds (ETFs). Departing from its previous “professional-investors only" view in 2018.  

SFC Chief Executive Officer Julia Leung says "The virtual asset landscape has evolved rapidly and begun to expand into mainstream finance...(The SFC) is prepared to accept applications for the authorisation of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds (VA spot ETFs)." For more details on Hong Kong's regulatory changes, visit Coindesk

Is this FOMO?

Harvest Hong Kong, a Chinese fund management firm, has applied for a Bitcoin ETF with the SFC. This decision was influenced by the US allowing Bitcoin ETFs. This application, submitted on January 26, seeks quick approval to launch Hong Kong's first Bitcoin ETF after the Chinese New Year & Venture Smart Financial Holdings plans to launch its own Bitcoin ETF in early 2024, according to Bloomberg.

Coin Telegraph reports that the regulatory authorities in Hong Kong are considering adopting a strategy akin to that of the U.S. Securities and Exchange Commission by potentially approving a range of spot ETFs, aiming to maintain fair competition. It's expected that there will be over 10 ETF's launched in 2024 when it happens.

Mainland China's Access to Bitcoin ETFs

The potential approval of ETFs in Hong Kong is a pivotal moment, especially for mainland Chinese investors. Thanks to the Shanghai-Hong Kong Stock Connect, launched in 2014, mainland investors can access the Hong Kong stock market. Mainlanders are expected to be able to invest in these ETFs through this link on the Shanghai Stock Exchange, which connects the two markets.

China's Changing Bitcoin Stance:

Long-time Bitcoin investors might recall China's ban on Bitcoin mining in 2021 and ICOs in 2017. However, the trend indicates a softening stance towards Bitcoin adoption in China.

Liu He, who was long time right-hand man of Xi Jinping and the architect of the 2021 Bitcoin mining ban stepped down last year and current leadership, appears to be more friendly to Bitcoin.

This evolving attitude, coupled with the potential influx of ETFs, could significantly fuel the ongoing Bitcoin bull market.

Conclusion:

China's possible entry into the Bitcoin ETF market could have a huge impact on Bitcoin.

Nine new ETFs are already buying up 10,000 Bitcoin every day. The Bitcoin halving in April will cut the supply of Bitcoin from miners in half. This leads to the question of who will be selling Bitcoin to the Chinese ETFs?