Harvest Global CEO and CIO Tongli Han said he ‘doesn't rule out' applying to offer its bitcoin and ether exchange-traded funds via the Stock Connect program for mainland Chinese investors if “everything goes well” in the next two years.
Harvest Global is one of the three issuers of Asia's first spot bitcoin and ether ETFs, alongside China Asset Management (ChinaAMC) and Bosera/HashKey, which debuted on the Hong Kong Stock Exchange last month as part of the city's plans to become a global crypto hub.
Han's comments were made during the two-day Bitcoin Asia conference that kicked off in Hong Kong on Thursday, the South China Morning Post reported.
Launched in May 2022, ETF Connect allows investors from mainland China to access a selection of ETFs listed in Hong Kong. The initiative is an extension of the Stock Connect scheme, which began in 2014, initially linking the stock exchanges of Hong Kong and Shanghai.
China's crypto ETF access remains uncertain
While some in the crypto industry have suggested that the Hong Kong spot crypto ETFs could attract substantial investor interest from the Chinese mainland through the Stock Connect program, it currently does not allow mainland investors to invest in crypto futures ETFs in Hong Kong, let alone spot crypto counterparts.
Given China's generally hostile stance toward the crypto industry, with most commercial crypto activities banned on the mainland, the prospect of any such approval, regardless of whether or not applications are made, remains highly uncertain.
Gary Tiu, Executive Director and Head of Regulatory Affairs of OSL, which acts as a sub-custodian and infrastructure service provider for the ETFs, told The Block ahead of their launch that although Hong Kong's crypto ETFs were not included in the eligible securities list of the Stock Connect program yet, “the potential for such inclusion is something that the market certainly likes.”
Hong Kong crypto ETF growth potential
The Hong Kong spot crypto ETFs were widely considered to have a disappointing debut, recording just $11.2 million in trading volume on their first day, a figure that pales in comparison to the $4.5 billion first-day volume for the spot bitcoin ETFs launched in the U.S. in January.
However, the caveat is that although the Hong Kong market is smaller, the issuers already had assets under management lined up before trading began, whereas in the U.S., this was held back until the ETFs debut.
The SCMP said Han expected the products to have a slow start but that with greater appeal across the Asia region, the Hong Kong ETFs had the potential to grow to double the size of the U.S. products, though he did not offer a timeline to achieve the milestone.
However, last month, Bloomberg Senior ETF Analyst Eric Balchunas threw cold water on the Hong Kong ETFs' potential. “Don't expect a lot of flows … we think they'll be lucky to get $500 million,” he wrote, adding that the Hong Kong ETF market is “tiny” and “Chinese locals cannot buy these, at least officially.”