China Takes a Softer Stand on Hong Kong's Crypto Aspirations

China Adopts a More Tolerant Position Regarding Hong Kong's

Crypto Aspirations

While China has cracked down on cryptocurrencies in the mainland, it appears to be taking a more lenient approach to Hong Kong's aspirations to become a crypto hub. This could be indicative of the Chinese government's recognition of the potential of the blockchain industry and its willingness to embrace the technology in the special administrative region.

Hong Kong's ambition of becoming a cryptocurrency hub is reportedly receiving subtle support from the Chinese government, in what could be seen as a stark contrast to the mainland's hard-line stance against crypto. 

Last October, the Hong Kong government proposed introducing a bill to regulate crypto and allow retail investors to directly invest in virtual assets, a move that could potentially challenge China's widespread crypto ban.

According to people familiar with the matter, Beijing officials have not been overtly opposed to the idea. A Bloomberg report from February 20th revealed that representatives from the China Liaison Office have been attending Hong Kong crypto gatherings to gain a better understanding of the situation.

Those familiar with the encounters have reported that the meetings have been friendly, leading local crypto business operators to believe that Beijing may be open to using Hong Kong as a testing ground for crypto, albeit in a very subtle manner.

Hong Kong has its own laws and government because it is a Special Administrative Area of China. The "one nation, two systems" approach, which Beijing promised would prevent Chinese meddling in the region's political and economic systems for 50 years, led to the return of the former British colony to China in 1997.

Nicholas Chan, a member of the National People's Congress and a lawyer specialising in digital assets, was reported as saying that the city is allowed to pursue its own goals as long as there are no violations of "the bottom line, to not undermine financial stability in China."

A new crypto licence regime was unveiled by Hong Kong's Securities and Futures Commission on February 20. It suggested that all centralised exchanges operating in the territory obtain licences from the regulator.

Additionally, it recommended granting retail traders access to authorised cryptocurrency trading platforms, arguing that restricting Hong Konger's access to these markets might lead them to trade on unregulated foreign platforms.

Many cryptocurrency businesses are seeking local expansion as a result of the recent regulatory push. The exchange Huobi Global recently announced plans to create a new Hong Kong-only exchange with a focus on institutional and high-net-worth people and that it will apply for a local licence.