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With the Hong Kong Bitcoin ETF fast approaching, new applications have arrived from an unexpected source: some of mainland China's largest traditional asset managers.
The new one from Hong Kong ETFs has been in the works for several months now and is generating great interest in the digital asset space around the world. Not only is its in-kind generation model an entirely different protocol from the Bitcoin spot ETF style popularized by the United States, but it also serves as an important anchor for ETF acceptance in East Asia . Total Assets Under Management (AUM) of Hong Kong Futures ETF Already Approved Already surpassed the $100 million mark in February and the spot ETF performed better in every country where it got the green light. As an economic region with both substantial capital investment and numerous international financial connections, Hong Kong would be the ideal candidate for a new testing ground in this market.
However, even the most optimistic readings of the situation have not predicted the emergence of a new player in this field. By the end of March 2024, a wide range of Hong Kong-based equity firms had expressed some interest in launching their own ETF, but only a handful had actually submitted a formal application. This situation changed dramatically on April 8, when a series of great players from mainland China have thrown their hat into the ring. Harvest Fund, with more than $230 billion in assets under management, and Southern Fund, with more than $280 billion in assets under management, have both filed their own applications through Hong Kong-based subsidiaries . Additionally, local media reported that China Asset Management, with $270 billion in assets under management, has asked its own subsidiary to enter into an unspecified partnership with existing Bitcoin ETF providers in the city.
Considering that there are already signs of decrease ETF craze in the US market, news like this is certainly a breath of fresh air. Even if American ETF issuers like BlackRock or Fidelity control several billion assets under management, the sudden appearance of these multi-billion dollar companies is not to be disdained. This, however, raises the question of how well the interactions between these mainland companies and Hong Kong's financial regulations will actually work together. Isn't it Bitcoin banned in China, with almost entirely clandestine use among Chinese citizens? How long will a partnership like this really last? It turns out that the blanket ban is somewhat exaggerated in Western media. After all, if Bitcoin was purely contraband in China, why Chainalysis report 90 billion dollars in transactions in one year?
Mainland China has certainly taken a tougher stance towards Bitcoin in recent years. After Bitcoin mining was banned in 2021, one of the world's largest mining hubs dried up virtually overnight. However, the apparent repression leaves a lot windows open to the market. Essentially, the main goal of Chinese authorities has been to raise the bar for entry and make it more boring and more difficult for average citizens to continue to access this market. Additionally, with many legitimate businesses unable to operate, Chinese Bitcoiners receive an implicit warning: “If you are scammed, do not expect our help or sympathy. » Nevertheless, savvy followers have found ways to continue using their currency without a leader, and these quiet exchanges obviously number in the billions.
It's this same ambiguous attitude that makes these new ETF developments so encouraging. Three of the largest asset managers in all of China quickly came on board, and that's no small commitment; If these companies become ETF issuers, they will be embroiled in activity with record trading volumes and broad international interest. This would not be the first time that Chinese capital companies invested heavily in Bitcoin-related businesses, but mining hardware in distant Ethiopia is very different from financial instruments in a city that is legally part of China. By taking this step, these companies have found a way to legally involve themselves in the world of Bitcoin, and this entanglement will even primarily involve Chinese citizens.
Such a move could go a long way to showing investors and regulators that the world of Bitcoin is nothing to fear but rather a very exciting opportunity. Hong Kong's aforementioned in-kind model means that new buyers will need to exchange deposited Bitcoins for a corresponding share in the ETF instead of simply purchasing them with fiat. In other words, there will be an undeniable and direct link between prestigious national companies and a trade which takes place largely out of sight. Could this link convince party officials that Bitcoin finally has a place in China? Will ETF issuers try to throw their weight behind it and push for Bitcoin to re-enter the legal system? How will the complex relationship between the PRC and Hong Kong impact the entire agreement?
When it comes to Hong Kong, they seem very committed to the dream of creating a regional crypto hub. Not only the locals banks has shown growing acceptance of the digital asset space as a whole, but this is small potatoes compared to the news from HashKey Global. South China Morning News reported On April 8, HashKey Group, a Hong Kong-based exchange that only deals in Bitcoin and Ethereum, launched its new “Global” initiative with a Bermuda-based exchange. HashKey announced the plan at the Web3 festival, and operations in Bermuda are expected to be just the first step in an ambitious project: the long-term hope is to “surpass US crypto giant Coinbase in terms of volume of transactions within five years. a major challenge.
And yet operations director Livio Weng doesn't seem particularly concerned, telling Job that “we’ve seen their data and we don’t think it will be difficult.” He added that most global competitors are either “easy to use but not compliant” or “compliant but difficult to use”, and Chinese regulatory challenges have given his company a substantial head start in this area. . It has been challenging to provide convenient and engaging service to customers while maintaining regulatory compliance. Lax restrictions globally will therefore make HashKey a big fish in a small pond. For example, the Bermuda Stock Exchange is already ready to offer almost 20 more digital assets than the initial Hong Kong operation. Chinese citizens living overseas are also a specific demographic target.
This type of enthusiasm is certainly a bold statement in the world of Bitcoin! Even in a chaotic market like this, the reigning champions of the forex industry will not be easily toppled. Yet this kind of confidence was would have reflected by other participants at the Web3 Festival, as the entire community placed its hopes in a rise in the price of Bitcoin. Mainland businesses are showing a real desire to enter the Bitcoin world via Hong Kong, and the city's existing businesses are confident they will be worth billions in the short term. Is it really so difficult to imagine that success in this area could change China's entire paradigm?
It is for these reasons that the next Bitcoin ETF in Hong Kong is so eagerly awaited by observers around the world. A new version of the same financial instrument could shake up the entire paradigm, bringing a vital element to ETFs internationally. However, if China reverses its hostility towards Bitcoin, it could frankly be an even bigger shake-up than the spot ETF itself. It is for these reasons that we need to carefully monitor developments in this area, as it seems likely that the impact will trickle down in one way or another. The signs all look bullish for Bitcoin, and the next big opportunity could be just around the corner.