New Investment Opportunities Emerge in Greater Bay Area
A significant shift in China’s financial landscape is underway, with the potential to open up new investment avenues for mainland residents in the Greater Bay Area. The People’s Bank of China and four other financial regulators have announced plans to “optimise” the Cross-boundary Wealth Management Connect scheme, allowing mainland residents in the region to purchase eligible investment products offered by financial institutions in Hong Kong and Macau.
A Gateway to Cryptocurrency Investment?
While the measures don’t specifically mention cryptoassets, Hong Kong has already launched several ETF products that invest directly in bitcoin and ether. This raises the possibility of a narrow legal channel for mainland investors to access cryptocurrency-related products. According to Liu Honglin, founder of Shanghai-based Mankun law firm, it’s “only a matter of time” before bay area mainland residents are allowed to access cryptocurrency ETFs.
Growing Demand for Virtual Assets
Mainland Chinese citizens’ appetite for virtual assets has grown significantly, driven by bitcoin’s rise as a mainstream alternative asset. Faced with increasing investor demand, Chinese regulators may look to “channel the flow” to Hong Kong, Liu added. However, Jill Wong, partner at Hong Kong law firm Reed Smith Richards Butler, cautioned that it’s unclear whether the new measures would extend to cryptoassets.
Broader Financial Opening
The measure is part of a broader set of guidelines aimed at expanding financial opening in China’s pilot free trade zones, including Shanghai and southern Guangdong province, as well as the free trade port of Hainan. Regulators also proposed measures to facilitate the inflow and outflow of funds for foreign investors and improve the cross-border flow of financial data.
A Response to US Crypto Embrace?
The urgency for China to act in the crypto sector has increased as the US government embraces the industry. According to Liu, “If the US makes efforts in this area, China will certainly make preparations in defence.” With a finite amount of bitcoin supply, China may seek to influence and control the market to limit the opportunities for other countries.
Hong Kong’s Virtual Asset Hub Ambitions
A potential opening up to the broader bay area could give a boost to Hong Kong’s virtual asset hub ambitions. Hong Kong has already established the framework and business model for cryptocurrency-related products, but lacks a user base and funds. Mainland China, with its vast population and capital, could provide the necessary impetus for growth.
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