Hong Kong Spot Bitcoin ETFs Likely to Exclude Mainland Chinese Investors

Bloomberg analysts have said mainland Chinese investors won’t be able to buy new Hong Kong based Bitcoin and Ether spot ETFs, predicting total inflows in the $1 billion range—far lower than previously expected.
It’s still possible that mainland investors could buy by exploiting loopholes, but this will still likely result in huge reductions in trading volume.

Some disappointing news on those Hong Kong Bitcoin and Ethereum ETFs we’ve been hearing so much about lately—according to Bloomberg ETF analysts it seems most mainland Chinese investors probably won’t be able to buy them. This potentially significantly reduces the impact of these new funds.

It’s not entirely unexpected given that mainland China is one of the more hostile jurisdictions for digital asset investing. Bloomberg said total combined inflows into the funds over the next few years may be below US$1 billion—an awful lot less than the ~US$25 billion figure being bandied about last week by crypto services firm, Matrixport.

Related: Breaking: Hong Kong Approves Ethereum and Bitcoin ETFs

So What Can We Expect From These New ETFs?

According to Bloomberg’s Senior ETF Analyst, Eric Balchunas, it’s likely mainland Chinese investors will be barred from buying into the new ETFs because of the Chinese government’s ongoing crackdown on virtual asset investing.

Balchunas said that while there are some loopholes which could potentially allow more determined investors to get access to the ETFs, the difficulty, risk and inconvenience will reduce mainland Chinese trading volume enormously:

Retail investors could potentially use the $50,000 remittance quote and apply for this ETF, but most don’t use this investment channel. For institutional investors the QDII (Qualified Domestic Institutional Investor) quota is unlikely to be approved for virtual asset ETFs despite the absence of clear guidelines.

Eric Balchunas, Senior ETF Analyst at Bloomberg

Related: Chinese Investors’ FOMO Craze Fuels Surge into US ETFs, Sparking Speculation about Crypto Influx

He said these expected restrictions on mainland Chinese investors will reduce inflows into the ETFs considerably, but he’s still hopeful of a combined total of about US$1 billion in the first two years.

According to Balchunas, the performance of the funds will largely come down to how quickly the region’s infrastructure and crypto ecosystem can be improved to facilitate growth:

Hong Kong’s spot Bitcoin and Ether ETFs could gather as much as $1 billion assets under management, but whether they get there could hinge on how quickly improvement comes to the infrastructure and ecosystem.