Is Mainland China Opening Up Trading? Market Signals Suggest Bitcoin Spot ETFs Could Be Included in the Shanghai-Hong Kong Stock Connect Program

The first week of Bitcoin spot ETF trading in Hong Kong saw lukewarm activity. Whether mainland Chinese investors could participate in these ETFs remains a crucial topic of discussion. Richard Byworth, Managing Partner at Syz Capital and a Bitcoin investor, revealed that Bitcoin spot ETFs in Hong Kong might be included in the Shanghai-Hong Kong Stock Connect Program.

In a tweet from early May, Byworth wrote, "I just got back from Hong Kong, and there's a rumor that Bitcoin spot ETFs may be included in the Shanghai-Hong Kong Stock Connect, which would have an absolutely massive impact."

The Shanghai-Hong Kong Stock Connect allows qualified investors in one market to purchase eligible stocks in the other market within a certain quota. The Shenzhen-Hong Kong Stock Connect is a cross-border investment channel linking the Shenzhen Stock Exchange and the Hong Kong Stock Exchange.

Investors in either market can trade the other market's stocks through local brokers and clearinghouses. The Shanghai-Hong Kong Stock Connect covers a broad range of stocks but has a daily quota.

CoinTelegraph covered Byworth's signals, noting, "While Byworth's comments may just be rumors, China's anti-crypto stance has made this a hot topic on social media."

Brian HoonJong Paik, Co-Founder and COO of SmashFi, also responded to the rumors that mainland Chinese investors may soon be able to buy Bitcoin spot ETFs in Hong Kong.

He said that 70% of China's wealth is tied up in real estate, with "100 million empty homes now. China needs an alternative asset to ease social unrest."

In another article, Paik listed several trade arrangements between Shanghai and Hong Kong that could allow Chinese investors to invest in Hong Kong's Bitcoin spot ETFs.

Apart from the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs, the Qualified Domestic Institutional Investor (QDII) program allows eligible Chinese institutional investors, such as banks, funds, and insurance companies, to invest in overseas markets, including Hong Kong.

Another trade agreement between Hong Kong and mainland China, the Mutual Recognition of Funds (MRF), allows eligible mainland and Hong Kong funds to distribute in each other's markets.

In 2021, China banned Bitcoin mining and foreign cryptocurrency exchanges from serving Chinese customers.

Despite the comprehensive ban on crypto-related businesses and services, Chinese courts still regard Bitcoin as legal property in multiple jurisdictions.

Notably, several international media outlets and crypto communities have cited experts predicting that China could lift its Bitcoin and cryptocurrency bans within three months. China previously prohibited cryptocurrencies due to financial risks and environmental concerns, but with Hong Kong approving Bitcoin ETFs, the ban could be lifted.

Ben Charoenwong, a scholar at the National University of Singapore, stated that capital flows have exceeded control limits.