While China has cracked down on cryptocurrencies in the mainland, it’s apparently taking a softer approach to Hong Kong’s crypto hub aspirations.
Was China’s anti-crypto-stance all a head-fake?
In September we remarked that, despite 2021’s ban, China has returned to rank among the top 10 countries in the world for adoption.
Top 10 countries in Chainalysis’ Global Crypto Adoption Index. (Table/Chainalysis)
And now, as CoinTelegraph reports, Hong Kong’s ambition of becoming a cryptocurrency hub is reportedly seeing subtle support from the Chinese government, in what could be seen as a contrast to the mainland’s hard-line anti-crypto stance.
In October last year, the government of Hong Kong floated the idea of introducing its own bill to regulate crypto and allow retail investors to “directly invest into virtual assets” that could possibly be in contrast to China’s widespread crypto ban.
According to people familiar with the matter, Beijing officials have not been brazenly opposed to the idea.
According to a Feb. 20 Bloomberg report, it is understood that representatives from the China Liaison Office have been frequenting Hong Kong crypto gatherings seeking to understand what’s going on.
So far, their encounters with Beijing officials on the matter have been friendly, according to those familiar, which is being perceived by local crypto business operators that Beijing — albeit very subtly — may be open to using Hong Kong as a testbed for crypto.
New Bitcoin narrative brewing: Hong Kong is getting into crypto.
What makes it even more interesting is the People's Bank of China is one of the only central banks in the world cutting rates & easing.
Asia is bidding [sources] pic.twitter.com/n5cwE7jI2l
— Luke Martin (@VentureCoinist) February 16, 2023
Hong Kong is a Special Administrative Region of China, allowing it to have its own laws and governance. The former British colony was transferred back to China in 1997 following a guarantee from Beijing there would be no Chinese interference with the region’s economic and political systems for 50 years, known as the “one country, two systems” principle.
National People’s Congress member and digital asset lawyer Nick Chan was quoted as saying that as long as there are no violations of “the bottom line, to not threaten financial stability in China,” then the city is free to undertake its own pursuits.
On Feb. 20, Hong Kong’s Securities and Futures Commission outlined a new crypto license regime that proposed that all centralized exchanges that operate in the region must be licensed with the regulator.
It also proposed allowing retail traders access to licensed cryptocurrency trading platforms, saying public feedback highlighted that denying access to crypto markets may push Hong Kongers to trade on unregulated overseas platforms.
The new regulatory push has spurred many crypto businesses to seek expansion into the city.
As Bloomberg reports, Hong Kong’s pivot could also open up a conduit to mainland Chinese investment if Beijing one day loosens the ban on most things crypto on the mainland.
Cameron Winklevoss, co-founder of the crypto exchange Gemini, tweeted Sunday that his “working thesis” is “the next bull run is going to start in the East.”
My working thesis atm is that the next bull run is going to start in the East. It will be a humbling reminder that crypto is a global asset class and that the West, really the US, always only ever had two options: embrace it or be left behind. It can't be stopped. That we know.
— Cameron Winklevoss (@cameron) February 19, 2023
Brian Armstrong, chief executive officer of Coinbase Global Inc., has alluded to Hong Kong as among the jurisdictions now leading in digital assets.
Justin Sun’s crypto exchange Huobi Global is applying for a crypto trading license in Hong Kong and is launching a new trading venue there, Sun said on Twitter on Monday. The new exchange, called Huobi Hong Kong, will focus on institutional investors and high-net worth individuals, he said.
Finally, we note that, reportedly, eToro just gained regulatory approval to offer crypto services in New York making us wonder if China will, ironically, be the one to lead a global reversal against crypto crackdowns?