Harvest Global eyes mainland China for crypto ETF products

Harvest Global Investments is eyeing an ambitious expansion into mainland China with its pioneering cryptocurrency ETFs, signaling a new era in investment opportunities bridging Hong Kong and the Chinese mainland.

Harvest’s Strategic Vision for ETF Expansion

Harvest Global Investments, not just content with being one of the three issuers of Hong Kong’s first spot cryptocurrency ETFs, is plotting a future where mainland investors can directly access their Bitcoin and Ether products. This vision is articulated through their potential inclusion in the ETF Connect scheme.

Launched in May 2022, this scheme allows mainland investors to engage with selected ETFs listed in Hong Kong, and is a component of the broader Stock Connect program that began back in 2014, initially linking the Hong Kong and Shanghai stock exchanges.

Han Tongli, the CEO and chief investment officer of Harvest Global, conveyed on the sidelines of the Bitcoin Asia conference, the firm’s openness to applying for their ETFs, which invest directly in crypto tokens, to be part of this connect program.

The caveat is, everything must proceed smoothly over the next two years. The integration of their crypto ETFs into this scheme could significantly elevate market confidence and introduce a vast new pool of investors to these emerging products.

The Challenges and Prospects

Despite the potential for groundbreaking expansion, challenges loom large due to the Beijing authorities’ known reservations towards cryptocurrencies and financial innovation. Most commercial cryptocurrency activities are currently banned in mainland China, though the legality of trading and ownership by individuals still sparks debates.

Nevertheless, Hong Kong’s crypto scene recently celebrated a milestone with the launch of its spot Bitcoin and Ether ETFs, the first in Asia. Despite their pioneering status, the launch was met with lukewarm trading volumes, starkly contrasting with the bustling ETF markets in the U.S.

However, these products were touted for their unique approach, including in-kind subscriptions that allow purchasing ETFs directly with Bitcoin and Ether, with fund managers even waiving management fees temporarily to attract investors.

The mixed reception to these ETFs highlights the hesitance and cautious approach many investors have towards Hong Kong’s commitment to becoming a regional crypto hub.

During a panel at the Bitcoin Asia conference, Han expressed disappointment over the slow start but remains optimistic about the potential growth of the local market, stating that the Hong Kong market, which he views as more neutral with broader appeal in Asia, could eventually double the size of its American counterparts.

As the city strives to establish a complete virtual asset ecosystem, Han foresees the local crypto ETFs flourishing to become the largest in trading volume in Hong Kong by year’s end. Harvest is also preparing to launch collateralized financial products based on these ETFs, further diversifying their offerings.

The two-day Bitcoin Asia conference, which took place at the Kai Tak Cruise Terminal, highlighted these ETFs prominently. Legislative Council member Johnny Ng opened the event with enthusiastic remarks about the ETFs, calling them a major development in Hong Kong’s financial industry.

Despite the second-largest first-day trading volume seen in these ETFs, with China Asset Management Company leading the pack, the journey ahead for Harvest Global and the broader ETF market in Hong Kong looks both promising and fraught with regulatory challenges.