Will Bitcoin and Ethereum ETF be open for trading in mainland China?

Written by: Jin Jianzhi

From May 9 to May 10, Bitcoin Asia was held in Hong Kong, where many giants gathered and spoke freely. Among them, Han Tongli, CEO of Harvest Fund, discussed the possibility of incorporating BTC and ETH ETFs into the ETF Connect program, which is part of the broader "Stock Connect" program launched in 2014 to connect Hong Kong and mainland China.exchangeconnect them.

It sounds very exciting. If the plan can be realized, it does mean that mainland residents can buy BTC and ETH ETFs. Han Tongli further stated, "As long as everything goes well in the next two years, we do not rule out applying to include our ETF in the interconnection plan."

Excited mainlanders must have this question: why can't this plan be implemented immediately and it will take two years? Because there are still some obstacles to the realization of the path mentioned by President Han. The specific main obstacles are as follows.

What is Stock Connect?

Stock Connect refers to a trading and settlement mechanism established between securities markets in different countries and regions, which enables investors to directly invest in stocks or other securities products in the other market through the local market.

The stock interconnection plan between the Chinese mainland and the Hong Kong market mainly includes two parts: Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect:

1. Shanghai-Hong Kong Stock Connect: It was launched on November 17, 2014, allowing the Shanghai Stock Exchange toexchangeInvestors on the Shanghai Stock Exchange (SSE) and the Hong Kong Stock Exchange (HKEX) buy and sell stocks on each other's markets through their respective trading and clearing systems.

2. Shenzhen-Hong Kong Stock Connect: It was launched on December 5, 2016, expanding the scope of interconnection to include the Shenzhen Stock Exchange (SZSE), further expanding the types of stocks that investors can trade.

On July 4, 2022, ETF Connect was officially launched, allowing qualified mainland and Hong Kong investors to invest in each other's ETF products across borders. The Connectivity Depositary Receipt business is also part of the Connectivity mechanism, which allows overseas companies to list on the other side's market by issuing depositary receipts (CDRs or GDRs), thereby achieving cross-border financing and investment.

In short, the Stock Connect Program is an important measure for the opening up of China's mainland capital market. However, the opening up of the mainland capital market has always been a process of trial and error, so it is conceivable that the tradable targets in the Stock Connect Program have strict conditions. For example, stocks usually need to be constituent stocks of the main indices of the two places and meet certain market value, liquidity and other standards.

As for ETFs, there are many requirements that need to be met for ETFs on the Hong Kong Stock Exchange to become tradable investment targets, as shown in the figure below. However, Hong Kong BTC and ETH ETFs currently fail to meet the requirements in terms of asset management scale, listing time, and index composition.

Image source: Hong Kong Exchanges and Clearing Limited’s “ETF inclusion in the Stock Connect mechanism – Notes for issuers (updated on 27 May 2022)”

We have always looked at things from a development perspective. There will be no problem with the listing time and management scale, but there will be a disaster in the index composition. At present, the constituent securities of the ETF in the mutual access need to be mainly Hong Kong stocks, but the BTC and ETH ETFs are virtual asset ETFs, which do not meet the above requirements that the constituent securities are mainly Hong Kong stocks. If we want to break through the obstacles of index components, the regulatory authorities need to approve and formulate rules for such products. And this depends on the efforts of excellent securities companies represented by Harvest Fund. Under the current favorable conditions of Web3 in Hong Kong, the regulatory forecast on the Hong Kong side is not too much of an obstacle, so the pressure is on the mainland.

Does mainland China’s regulatory policy allow it?

For mainland retail investors, buying and selling virtual currencies has never been explicitly prohibited. If the total assets of securities accounts and capital accounts are no less than RMB 500,000, which meets the conditions for opening the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, purchasing BTC and ETH ETFs through the mutual connection can also be a worry-free investment method.

But to implement Bitcoin Ethereum ETF, it will be opened to the mainlandXiaobai NavigationThe plan to open the trading market will put great pressure on financial institutions in the Mainland, represented by securities companies.TokenThe Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation (Notice No. 924) and the Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation (Notice No. 924) both clearly state that financial institutions shall not provide services for virtual currency-related business activities. Financial institutions shall not provide services such as account opening, fund transfer, and clearing and settlement for virtual currency-related business activities, shall not include virtual currency in the scope of collateral, shall not carry out insurance business related to virtual currency, or include virtual currency in the scope of insurance liability.

In other words, if mainland securities firms provide mainland retail investors with BTC and ETH ETF purchase services, it will be a clear violation of the 94 Announcement and the 924 Notice.

summary

Announcement 94 and Notice 924 are both policy regulations. Announcement 94 was issued in 2017, and Notice 924 was issued in 2021. It can be said that it has been some time since then. Policy regulations have always been changeable, just like the housing purchase restriction policy. It is difficult for us to predict how the policy will change in the future, but we will see some unstoppable trends in the course of historical development. There must be a big gap between the trend and the current situation. No one knows in what form and at what time these gaps will be narrowed, but there are always many people working hard.

The article comes from the Internet:Will Bitcoin and Ethereum ETF be open for trading in mainland China?

Related recommendations: Which node sales company is the most sincere? Data comparison of Aethir, Sopon, and CARV

Slave NodeTokenIn terms of rewards, CARV is the most generous. Written by: Riyue Xiaochu First, let’s understand node sales. Node sales is actually a new type ofTokenThe sale method is a way for multiple parties to benefit. For projects, a decentralized network itself requires a large number of nodes. For project parties, node sales have also become a new way of financing. And for us retail investors, the current…