Harvest Global Investments, a Chinese fund house and one of the issuers of Hong Kong’s first spot Bitcoin and Ethereum exchange-traded funds (ETFs), has confirmed plans to potentially open these funds to mainland Chinese investors through the Hong Kong Stock Connect. This development could vastly expand the investor base and significantly impact the cryptocurrency market in Asia.

Currently, Harvest Global offers Bitcoin and Ether ETFs in Hong Kong, with these products enabling direct investment in the respective cryptocurrencies. The possibility of including these ETFs in the ETF Connect scheme, part of the broader Stock Connect initiative launched in 2014 to link Hong Kong with mainland Chinese exchanges, was discussed by Harvest CEO Han Tongli at the Bitcoin Asia conference.

Han stated, “We don’t rule out applying for our ETFs to be included in the connect programme, as long as everything goes smooth and well in the next two years.”

The move to integrate crypto investments into the Stock Connect could be a significant step, given the previously restricted access to such products for mainland investors. Hong Kong’s approach to cryptocurrency regulation has been more open compared to mainland China, where most commercial crypto activities are banned, but trading and ownership by individuals remain a gray area legally.

Despite the innovative nature of these spot crypto ETFs and their ability to offer direct exposure to cryptocurrencies rather than derivatives or stocks of companies related to digital currencies, the initial trading volumes have been underwhelming compared to the US market. According to Han, this is partly due to the market’s cautious view of Hong Kong’s virtual asset policies and its implications for the future of these ETFs.

Han remarked during a panel at the Bitcoin Asia conference that the local market could potentially double the size of the US products, emphasizing the strategic importance of Hong Kong as a more neutral ground with broader appeal in Asia. He attributed the slow start to various factors, including the market’s doubts about Hong Kong’s commitment to becoming a crypto hub, stating, “People are still skeptical about Hong Kong’s status as a special [administrative] region. It’s located in China, and many people don’t want to see Hong Kong become more successful for whatever reason.”

In his discussion, Han also highlighted the competitive advantages of Hong Kong’s crypto products, like the possibility for in-kind subscriptions — buying ETFs directly with bitcoin and ether — and temporary waiving of management fees to attract investors. These features, along with the potential inclusion in the Stock Connect, are seen as critical to gaining traction and establishing Hong Kong as a key player in the global cryptocurrency market.

At press time, BTC traded at $62,754.

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