While China has cracked down on cryptocurrencies in the mainland, it’s apparently taking a softer approach to Hong Kong’s crypto hub aspirations.
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.
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. Most recently the exchange Huobi Global said it would seek a local license and plans to open a new Hong Kong-only exchange with a focus on institutional and high-net-worth individuals.