Hong Kong-based funds with ties to state-owned enterprises are exploring investments in stocks of Bitcoin-holding companies to navigate China's crypto restrictions, signaling potential indirect institutional capital flow.

Executive Summary

Funds in Hong Kong, backed by Chinese state-owned enterprises (SOEs), are reportedly developing strategies to invest in the stock market by targeting companies that hold significant Bitcoin (BTC) reserves. This approach serves as a workaround to China's direct ban on cryptocurrency investments, potentially funneling institutional capital into the crypto market indirectly.

The Event in Detail

Several Hong Kong-based funds with SOE backing are actively planning crypto-stock linked projects. These funds are structured to invest in the equity of companies that maintain substantial Bitcoin holdings. This indirect investment strategy exploits a regulatory loophole, as direct investment into crypto assets is prohibited for SOEs, while investing in stocks of Bitcoin-holding companies is currently permissible. The goal is to offer investors exposure to crypto assets without directly violating Chinese regulations.

Market Implications

This development could lead to increased demand for publicly traded companies with significant Bitcoin holdings, mirroring the strategy employed by firms like MicroStrategy (MSTR). Increased interest in these stocks may drive up their prices, providing capital to companies with significant Bitcoin reserves. This influx of capital could further stabilize and legitimize the Bitcoin market, demonstrating innovative approaches to navigate regulatory hurdles. However, such strategies may also attract increased regulatory scrutiny from both Chinese and international regulatory bodies.

Expert Commentary

Financial analysts suggest that this move reflects a growing interest from traditional financial institutions in exploring digital assets. While direct investment remains restricted, the indirect approach allows SOEs to participate in the potential upside of the crypto market. This strategy also mirrors the earlier adoption phase led by MicroStrategy, which strategically accumulated Bitcoin on its balance sheet, attracting significant investor interest. However, experts also caution that these investments carry significant risk, particularly in bearish crypto markets.

Broader Context

This initiative aligns with Hong Kong's ambition to position itself as a hub for financial innovation and Web3 integration, as highlighted by recent developments like the issuance of the world's first public Real World Asset (RWA) bond on the Ethereum blockchain by Futian Investment Holding, a Chinese SOE. This context is further exemplified by firms like Fosun International bringing traditional financial instruments onto blockchain infrastructure. The trend suggests a broader acceptance of digital assets among traditionally conservative financial entities, using the Hong Kong regulatory environment to their advantage. The increasing number of public companies holding Bitcoin, which has doubled since 2024, underlines the growing trend of corporate adoption of crypto assets as reserve assets, with firms collectively holding over $103 billion worth of Bitcoin as of 2025.