ETFs
Harvest CEO wants its Bitcoin and Ether ETFs on Stock Connect to target mainland Chinese investors, but the ecosystem needs to grow
Chinese fund company Harvest Global Investments, one of three issuers of Hong Kong’s first spot cryptocurrency exchange-traded funds (ETFs), is already mulling a future that would give mainland investors direct access to its Bitcoin and Ether products through the ETF Connect program, according to the company’s CEO.
Harvest “does not rule out” applying for its ETFs that invest directly in crypto tokens to be included in the Connect program that links exchanges in mainland China and Hong Kong, provided “all goes well” over the next two years. , Harvest CEO Han Tongli, who is also the company’s chief investment officer, told the Post on the sidelines of the Bitcoin Asia conference on Thursday.
ETF Connect, launched in May 2022, allows mainland investors to access a range of selected ETFs listed in Hong Kong. It is part of the wider Stock Connect program launched in 2014, initially linking the Hong Kong and Shanghai stock exchanges.
The inclusion of crypto ETFs in the program could significantly boost market confidence and provide a large pool of new investors for the nascent products. Some question whether their inclusion would be allowed given Beijing’s hostile stance toward cryptocurrencies. Most commercial crypto activity is banned on the continent, although peer-to-peer trade and ownership remains an ongoing legal issue.
The Hong Kong Bitcoin and Ether futures ETFs, launched in 2022, have not been included in Stock Connect.
Hong Kong Legislative Council member Johnny Ng, known for his pro-cryptocurrency stance, delivers his keynote speech at the Bitcoin Asia conference on May 9, 2024. Photo: SCMP/Matt HaldaneThe bitcoin and ether spot ETFs of Hong Kong, the first of its kind in Asia, debuted last week and were hailed as a significant step forward in the city’s efforts to become a crypto hub.
Companies have touted the benefits of Hong Kong products, including so-called in-kind subscriptions or purchasing the ETFs directly with bitcoin and ether. Fund managers have dangled incentives to boost investment, such as waiving management fees for a specific period.
However, many considered the debut disappointing, as the trading volumes were a tiny fraction of trading in the US Bitcoin ETFs launched in January. Hong Kong’s ETF market is much smaller than that of the United States.
Many have taken a wait-and-see approach amid doubts over Hong Kong’s commitment to the virtual assets sector, which has weighed on ETF trading volume, Han said, adding that he expected a ” slow start” of products.
“People remain skeptical about Hong Kong’s status as a special country [administrative] region,” Han said during a Bitcoin Asia panel discussion. “It’s located in China…and a lot of people don’t want to see Hong Kong become more successful, for whatever reason.”
But Han sees greater potential for the Hong Kong market as it is a “more neutral” region with more appeal in Asia, and he said local crypto ETFs could double the size of products Americans.
Han declined to offer a timetable for when he thought that milestone might be reached. It depends on when Hong Kong manages to establish a full virtual asset ecosystem, he said, but the city has already “sown a seed” by launching ETFs. Other products like stablecoins will take longer to gain regulatory approval, he added.
Harvest’s current goal is for its spot crypto ETFs to become the largest in Hong Kong in terms of trading volume by the end of this year, according to Han, as it prepares to issue collateralized financial products based on ETFs.
Crypto spot ETFs were a major topic at the two-day Bitcoin Asia conference, which kicked off Thursday in Hong Kong at the Kai Tak Cruise Terminal. Legislative Council member Johnny Ng, known for his pro-crypto stance, opened the event with comments calling the new financial products “an important milestone in the development of Hong Kong’s ETF market.”
Harvest’s crypto spot ETFs had the second highest first-day trading volume on April 30 among the three companies that offered them. China Asset Management Company (ChinaAMC) was the largest.