The Chinese government’s official stance on cryptocurrencies has remained unchanged since the crackdown in 2021. However, in a surprising twist, Beijing appears to be quietly backing Hong Kong’s push to become a cryptocurrency hub.
This support encourages Chinese mainland firms to register their businesses and return to the city as a testing ground for digital assets.
Hong Kong’s crypto push
The goal of Hong Kong’s bitcoin industry drive, announced in October, is to reinvigorate the city’s financial center. As part of the strategy, it’s been proposed to open the market to individual investors for trading digital currencies like Bitcoin and Ether.
With a new licensing framework for virtual asset exchanges, the Hong Kong government will take effect in June 2022.
In recent months, officials from China’s Liaison Office and other government agencies have become regulars at the city’s cryptocurrency meetups, where they have exchanged business cards and WeChat information with crypto operators.
Beijing’s stance toward Hong Kong’s attempts to become a cryptocurrency center is becoming clearer thanks to its low-key backing. Although they strictly regulate digital asset activities on the mainland, the authorities in Hong Kong are eager to use the territory as a trial ground.
China’s ban on cryptocurrencies
In 2017, China initiated a crackdown on cryptocurrencies that would eventually result in a ban on trade by 2021. It was because of this change that major Chinese startups like Binance and Tron left the country.
China, however, has lately loosened its hold on the development of the blockchain technology underlying these digital assets, permitting the creation of certain non-fungible tokens.
Concerns about consumer protection, the use of crypto to avoid capital restrictions, and the environmental harm caused by the energy needed by Bitcoin mining suggest that Beijing is unlikely to loosen its own prohibition.
For the first time in many years, Chinese crypto entrepreneurs are making plans to relocate back to Hong Kong from Singapore and elsewhere.
One of them is the founder of Tron, Justin Sun, who said on Twitter last month that he would relocate to Hong Kong to be closer to the action. Crypto exchange Huobi also plans to expand its operations in the city.
In a recent interview, Sun speculated that the recent shift in Hong Kong’s SAR government’s stance on cryptocurrencies was an indication that the Chinese central government had given the city-state permission to conduct experimental pilot programs to determine the most effective methods of adopting and localizing cryptocurrencies for the vast Chinese market.
He has a very bullish outlook on the future of cryptocurrency in the Asia-Pacific area, particularly in the China region, over the next decade.
There will always be rivalry from other countries like Singapore and Dubai, despite the fact that Hong Kong’s fresh drive for cryptocurrency is gaining traction.
Duncan Chiu, a legislator in Hong Kong’s technology sector, claims that the city would be pushed to improve in response to increased competition. The key is to ensure that the sector is properly regulated and licensed without stifling creativity and new ideas.
