Mainland Chinese officials have reportedly subtly backed Hong Kong’s plans to open to digital currencies.
China supports Hong Kong’s crypto-friendly plans. On Monday this week, the Hong Kong government outlined a framework of new rules for the digital currencies industry and hinted at the possibility of relaxing its stricter rules.
Hong Kong’s Securities and Futures Commission (SFC) issued a statement seeking public comments for the new framework, which would require cryptocurrency platforms to register with the regulator. The authority also said it would consider reversing a ban, active since 2018, on trading such assets between retail investors.
Ambitions to establish a more favorable environment for cryptocurrency firms contrast with mainland China’s strict anti-cryptocurrency stance, where they strictly banned any activity with the asset class since 2021.
However, contrary to what one might think, these Hong Kong ambitions have the backing of the Chinese government. According to a Bloomberg report, representatives of the China Liaison Office and other Beijing officials have been attending meetings in Hong Kong to discuss the issue. So far, they have not opposed the city’s friendly plans.
“The meetings have been friendly, with officials checking on developments, asking for reports, and, in some cases, making follow-up calls.”
Hong Kong aims to become a crypto hub
Bloomberg quoted statements from Nick Chan, a member of the National People’s Congress and a lawyer who advises on cybersecurity and digital assets, who stressed that “as long as the basic principle of not threatening China’s financial stability is not breached, Hong Kong is free to explore its path.”
As the publication suggests, the discreet endorsement could be part of a more elaborate plan by Beijing to use Hong Kong as a testing ground for cryptocurrencies.
As the report recalls, Tron founder Justin Sun had previously hinted at this idea in January, suggesting that Hong Kong’s change in attitude towards cryptocurrencies indicated that the Chinese central government had granted the city “pilot country status for some experiments” to adopt digital currencies.
While not everyone seems convinced that the “experiment” will lead to a policy change in mainland China and in general, there is little indication that the central government will relax its ban, as the report points out, especially in the face of recent market turbulence and the collapse of high-profile companies.
Hong Kong CryptoRegulation
Hong Kong proposed its project at the end of 2022 to regulate the digital asset sector, separating itself from China’s strict regulation. The proposal was possible because the former British colony of Hong Kong is a Special Administrative Region of China, which allows it to have its own laws and government.
The framework will impose a new licensing regime for virtual asset exchanges wishing to operate in Hong Kong, which will come into effect in June. Regulators have also proposed allowing retail traders to access licensed exchanges, arguing that denying access to cryptocurrencies may push residents to trade on unregulated platforms. Chinese officials have not disapproved of this roadmap, though whether it is a more elaborate plan by the central government to assess a possible broader shift in the nation’s stance remains to be seen.
Hong Kong’s ambitions could represent good news for Chinese cryptocurrency firms forced out of the country amid tightening regulations in recent years. Yesterday, exchange Huobi Global expressed intentions to seek to license in Hong Kong in the face of favorable regulatory changes.