Harvest CEO already thinking of getting its spot crypto ETFs on Stock Connect

Chinese fund house Harvest Global Investments, one of the three issuers of Hong Kong’s first spot cryptocurrency exchange-traded funds (ETFs), is already thinking of a future that gives mainland investors direct access to its bitcoin and ether products through the ETF Connect scheme, according to the company’s CEO.

Harvest “doesn’t rule out” applying for its ETFs that invest directly in crypto tokens to be included in the connect programme that links exchanges in mainland China and Hong Kong, as long as “everything goes smooth and well” in the next two years, Harvest CEO Han Tongli, who also serves as the firm’s chief investment officer, told the Post on the sidelines of the Bitcoin Asia conference on Thursday.

ETF Connect, launched in May 2022, gives mainland investors access to a range of selected ETFs listed in Hong Kong. It is part of the larger Stock Connect scheme that launched 2014, first connecting the Hong Kong and Shanghai stock exchanges.

Inclusion of crypto ETFs in the scheme could be a major confidence boost for the market, and offer a large new investor pool for the nascent products. Some have questioned whether their inclusion would be allowed given Beijing’s hostile stance towards cryptocurrencies. Most commercial crypto activities are banned on the mainland, although trading and ownership among individuals remains an ongoing legal question.

Hong Kong’s bitcoin and ether futures ETFs, which launched in 2022, have not been included in the Stock Connect.

Firms touted the Hong Kong products’ advantages, including so-called in-kind subscriptions, or buying the ETFs directly with bitcoin and ether. Fund managers dangled incentives to drive investment such as waiving management fees for a specific period.

Many chose a wait-and-see approach amid doubts about Hong Kong’s commitment to the virtual asset sector, which weighed on the ETFs’ trading volume, Han said, adding that he had expected the products to have a “slow start”.

“People are still sceptical about Hong Kong’s status as a special [administrative] region,” Han said in a Bitcoin Asia panel discussion. “It’s located in China … and many 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 greater appeal in Asia, and he said the local crypto ETFs could grow to double the size of the US products.

Han declined to offer a timeline 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 “sowed a seed” by launching the ETFs. Other products like stablecoins will take more time to get regulatory approval, he added.

Harvest’s goal at the moment is for its spot crypto ETFs to become the largest in Hong Kong by trading volume by the end of this year, according to Han, as it prepares to issue collateralised financial products based on the ETFs.

The spot crypto ETFs were a major topic at the two-day Bitcoin Asia conference, which kicked off in Hong Kong on Thursday at the Kai Tak Cruise Terminal. Legislative Council member Johnny Ng, known for his supportive stance on crypto, opened the event with comments heralding the new financial products as “an important milestone in the development of the Hong Kong ETF market”.

Harvest’s spot crypto ETFs had the second-largest first-day trading volume on April 30 among the three companies that offered them. China Asset Management Company (ChinaAMC) had the largest.