Is Beijing Quietly Backing Hong Kong’s Crypto Ambitions?

Earlier on Monday, February 20, the news broke out that Hong Kong could allow retail players to trade big cryptocurrencies like Bitcoin and Ethereum ahead this year. A few hours later, crypto exchange Huobi announced that it is seeking a license to start a local exchange in Hong Kong.

As Hong Kong makes the push to reestablish itself as the crypto hub in Asia, questions are arising about whether Beijing is quietly backing this move. Over the past few months, representatives from China’s Liaison Office have been frequent guests at Hong Kong’s crypto gatherings.

Sources familiar with the matter told Bloomberg that the officials have been checking on the developments, asking for reports, and also making follow-up calls. Local crypto operators from Hong Kong say that t`he presence of China officials is clearing doubts over Beijing’s support for making the region a crypto hub.

It seems that Beijing is looking to keep Hong Kong as a testing ground for digital assets while keeping tight bans in the mainland. Taking a cue, businesses from the mainland and overseas are planning a return to Hong Kong after a major crackdown in 2021. Nick Chan, a National People’s Congress member told Bloomberg:

“As long as one doesn’t violate the bottom-line, to not threaten financial stability in China, Hong Kong is free to explore its own pursuit under ‘One Country, Two Systems’”.

Hong Kong Crypto: Will Beijing Relax Its Crypto Ban?

Hong Kong’s recent interest in the crypto space has been quite opposite to global development. Strong markets like Singapore and the United States have seen the tightening of regulations recently.

However, some crypto players are still planning a return and Huobi’s Justin Sun is one among them. During his interview last month, Sun said:

“The changing attitude of the Hong Kong SAR government towards crypto signals a nod from the Chinese central government granting pilot status to HK for some forward-looking experiments on how can crypto be best adopted and localized for the huge Chinese market at large. I’m very bullish on the outlook for crypto in the greater China region for the next decade.”

When it comes to the mainland, there’s no clear indication that China would relax its crypto ban. However, sources said that the mainland representatives are reporting their findings in Hong Kong to top officials in China.

Another interesting data shows that a staggering 70% of Web3 firms that signed up for Hong Kong’s accelerator program G-Rocket were overseas Chinese entrepreneurs. Duncan Chiu, a Hong Kong lawmaker of technology industry said:

“We are the window of China, and yet we have globally-adopted legislation, practices, and economic principles. “There will always be competition from other places like Singapore and Dubai. It will only push us to do more and the most important thing is the balance on how to regulate, license the industry and yet not to over-regulate it so that it hinders innovation.”

This year in June, Hong Kong’s new licensing regime for digital assets is likely to come into effect.