Asia Morning Briefing: U.S. BTC ETF Inflows Dwarf Hong Kong's as Local Investors Stick With Stocks

Good Morning, Asia. Here's what's making news in the markets:

Welcome to Asia Morning Briefing, a daily summary of top stories during U.S. hours and an overview of market moves and analysis. For a detailed overview of U.S. markets, see CoinDesk's Crypto Daybook Americas.

Data from CoinShares continues to highlight the gap in investor enthusiasm between the U.S. and Hong Kong when it comes to bitcoin BTC$86,819.30 ETFs and other listed digital asset products.

Digital asset products in the U.S. generated $4.36 billion in inflows last week, accounting for nearly the entire global total of $4.39 billion, according to CoinShares. In Hong Kong, inflows into crypto ETFs totaled just $14.1 million (USD).

The disparity comes despite strong demand for exchange-traded products in Hong Kong overall. From July 14 to 18, Hong Kong-listed ETFs saw approximately $880 (USD) million in net inflows, according to data from Hong Kong Exchanges and Clearing. Most of this capital was invested in equity-focused funds that track local stocks and sector themes, with crypto accounting for only 1.6 percent of total ETF inflows.

Even within the U.S., where equity ETFs saw net outflows of $11.75 billion and bond funds brought in $5.55 billion, crypto funds defied the trend by drawing in capital at record pace.

The contrast highlights the increasing importance of crypto as a distinct asset class in American portfolios, whereas in Hong Kong, investors continue to view it as a niche asset class.

However, a path may be forming that could shift the dynamic.

At Consensus Hong Kong in February, Yifan He, CEO of Red Date Technology, suggested a potential regulatory route for mainland Chinese investors to gain exposure to crypto, without breaking mainland China’s crypto ban.

Speaking on stage, He pointed to the Qualified Domestic Institutional Investor (QDII) program, which already allows select mainland investors to purchase U.S.-listed ETFs using RMB. A similar structure, he argued, could be adapted to Hong Kong’s spot bitcoin and ether ETFs.

Under this model, mainland investors would not directly hold crypto, but would gain exposure through licensed intermediaries, mirroring how they currently trade Hong Kong or overseas equities.

"If they have a system for you to buy and sell in RMB, but never move money outside China, then it's just another regulated investment product," He said.

While capital controls remain the core barrier, the proposal reflects a changing tone in Beijing.

"I see some signal from financial regulators," He said at the time. "They're beginning to talk about bitcoin, saying we need to pay more attention and do more research on digital assets."

This would not amount to China unbanning crypto, but rather integrating it within an approved sandbox. Such a move could dramatically increase participation in Hong Kong’s crypto ETFs, which have struggled to gain traction despite strong infrastructure and regulatory clarity.

For now, though, U.S. dominance in crypto fund flows remains unchallenged. However, if Beijing were to permit crypto exposure through Hong Kong's ETFs, the flow dynamics in the region could look significantly different in the years ahead.

Market Movements:

BTC: Bitcoin BTC$86,819.30 is currently trading above $117,000, remaining locked in a tight range.

ETH: Ethereum ETH$2,926.10 surged near $3,800 on Monday, up 13% year-to-date, as analysts pointed to signs of a potential turnaround after months of underperformance.

Gold: Gold rose 1.2% to $3,391.90 on Tuesday, supported by a weaker dollar and growing expectations of lower interest rates.

Nikkei 225: Japanese stocks rose as markets reopened Tuesday, with the Nikkei 225 up 1.12% to 40,254.18, as investors reacted to the ruling party's loss of its upper house majority in weekend elections.

S&P 500: US stocks closed mixed Monday, but the Nasdaq and S&P 500 still hit fresh record highs.

Elsewhere in Crypto:

• Robinhood CEO Acknowledges OpenAI Crypto Stock 'Controversy', But Is Doubling Down (Decrypt)
• Pudgy Penguins CEO predicts NFT mania, crypto gaming comeback (Blockworks)
• BitGo Files to Go Public as Crypto Market Surges Past $4 Trillion (CoinDesk)