HomeCryptoHong Kong’s Crypto Hub Ambitions Win Quiet Backing From Beijing |Updated|.

Hong Kong’s Crypto Hub Ambitions Win Quiet Backing From Beijing |Updated|.

Hong Kong welcomed cryptocurrency companies with open arms in October to rejuvenate its struggling financial center. Recent indications suggest that this push has received subtle support from Beijing, giving mainland Chinese firms a reason to return.

Individuals who knew the situation, and preferred to remain anonymous when discussing private information, reported that representatives from China’s Liaison Office and other government officials have been attending crypto events in Hong Kong over the last few months. During these events, they exchanged contact information, including business cards and WeChat details, and checked on the industry’s progress, requesting reports and making follow-up calls. The officials have been amicable, but the Liaison Office, which is the primary mainland organization in Hong Kong, did not respond to a comment request.

According to crypto industry insiders, the involvement of officials from Beijing is dispelling any uncertainty about the Chinese government’s stance on Hong Kong’s goal of becoming a center for cryptocurrency. The subtle support demonstrates that authorities are interested in using the hands-off approach of Hong Kong as an experimental platform for digital assets while maintaining strict control over such activities on the mainland.

Following the subtle endorsement from Beijing, both domestic and international companies are heeding the signal and moving to register their businesses in Hong Kong, with plans to return to the Chinese territory. This move comes after a 15-month ban by Beijing on the industry, which forced many to establish their businesses overseas.

Nick Chan, a lawyer who provides guidance on cybersecurity and digital assets and is also a member of the National People’s Congress, stated that as long as the financial stability of China is not endangered, Hong Kong is permitted to explore its initiatives within the “One Country, Two Systems” framework. He emphasized that certain limits must not be exceeded to avoid violating the bottom line.

On Monday, Hong Kong disclosed a new proposal to increase cryptocurrency access. The plan would permit retail investors to trade digital tokens, such as Bitcoin and Ether, while ensuring adequate safeguards, such as risk assessments, reasonable limits on allowable exposure, and knowledge tests, on licensed exchanges monitored by the Securities & Futures Commission. These measures were described in a consultation paper released by the regulator.

On Tuesday, shares of Chinese companies related to blockchain and cryptocurrency experienced a surge in value. OKG Technology Holdings Ltd., a digital asset firm, climbed as high as 22% in Hong Kong, while New Huo Technology Holdings Ltd., a crypto platform operator, saw a peak increase of 14%. In mainland China, Shenzhen Forms Syntron Information Co., a software specialist, also experienced a rise in value, reaching a high of 10%.

China initiated its efforts to regulate cryptocurrency in 2017 and imposed a trading ban in 2021, prompting some of the country’s most prominent players, such as Binance and Tron, to leave. Only recently, the world’s second-largest economy loosened its control over the development of blockchain technology that supports these digital assets, permitting the creation of some non-fungible tokens (NFTs).

Currently, there are no clear indications that Beijing will lift its own ban on cryptocurrency, as the government continues to be concerned about issues such as consumer protection, the potential use of cryptocurrency to bypass capital controls, and the environmental impact of Bitcoin mining.

According to the sources, representatives from mainland China who are visiting Hong Kong are sharing their observations with authorities in the mainland, but the purpose of these reports is not known.

He Yifan, the founder and CEO of Red Date Technology, a blockchain company backed by the state, stated that as long as China’s crypto policy remains under the control of the ruling Party, there will be no reversal of the current stance. He added that allowing cryptocurrencies to flourish would not benefit the real economy.

In recent months, Chinese officials have supported Hong Kong’s efforts to establish itself as a fintech hub. Governor of the People’s Bank of China, Yi Gang, delivered speeches at significant events in Hong Kong on China’s central bank digital currency and its collaboration with the Hong Kong Monetary Authority.

Hong Kong’s renewed focus on cryptocurrency has coincided with the collapse of FTX, a prominent player in the industry, and contrasts Singapore’s tightening regulatory environment. For Hong Kong to succeed in its efforts to become a cryptocurrency hub, it must attract back Chinese cryptocurrency entrepreneurs who had relocated to Singapore and other locations while awaiting more clarity on regulations in Hong Kong.

Justin Sun, the founder of Tron, has expressed his intention to return to Hong Kong, stating on Twitter last month that he plans to relocate to the city to be “closer to the action.” He has also revealed that the digital asset exchange Huobi is planning to expand its operations in Hong Kong.

According to a January interview, Justin Sun believes that the recent change in the attitude of the Hong Kong SAR government towards crypto is an indication of support from the Chinese central government, which grants Hong Kong a pilot status to experiment with the adoption and localization of crypto for the large Chinese market. He is optimistic about the future of crypto in the greater China region for the next decade.

The city is also attracting smaller and less established companies.

Web3

Co-founder Caspar Wong said that around 70% of the 300 Web3 firms enrolled in Hong Kong’s accelerator program G-Rocket were established by overseas Chinese entrepreneurs. At the same time, approximately a quarter was located in mainland China.

Duncan Chiu, a technology industry lawmaker in Hong Kong, stated that the city has a global outlook and a close connection to China. He said, “We are the window of China, and yet we have globally-adopted legislation, practices, and economic principles.”

The speaker noted that there will always be competition from other places, such as Singapore and Dubai, but this will only serve as motivation to do more. According to the speaker, the key is to strike a balance between regulating and licensing the industry without over-regulating it to the point that it hinders innovation.

The new regulatory system for virtual asset exchanges in Hong Kong is set to commence in June, but potential licensees anticipate it may take longer to obtain the necessary approvals.

The finance industry is closely watching Hong Kong’s crypto developments, but it is warned that entry may be challenging. According to Tan Yueheng, the chairman of BOCOM International and permanent honorary chairman of the Chinese Securities Association of Hong Kong, only a few companies are likely to meet the requirements for a license, which include strong risk management controls, systems, product knowledge, and capital quality.

Cryptured Team
Cryptured Team
The writers team at Cryptured.com is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.
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