Hong Kong has been steadily progressing in terms of cryptocurrency adoption, with more local businesses and government entities embracing digital currencies. However, despite these developments, mainland China has not changed its anti-crypto stance in terms of local regulations.
In September 2021, China banned all cryptocurrency transactions and mining, causing a significant decline in the value of cryptocurrencies such as Bitcoin. Since then, the Chinese government has maintained its hard stance on digital currencies, and there are no indications that it will change anytime soon.
Zhou emphasized that despite the backing of the Chinese government, CPIC Investment Management operates as a Hong Kong entity regulated by the Securities and Futures Commission, and their involvement in cryptocurrency is permitted by Hong Kong regulations.
However, Zhou does not expect the Chinese government to change its crypto policies in the foreseeable future. “China has maintained its anti-crypto stance for a long time, even before the September 2021 ban,” he noted.
Lesperance & Associates founder David Lesperance agrees with Zhou, stating that “Given that the Chinese government is coming down hard on the financial sector, it is hard to imagine that China is loosening its control over the ability for Chinese nationals to use crypto.”
Despite the strict regulations in mainland China, some Chinese state-affiliated banks have been opening bank accounts to serve crypto clients in Hong Kong, and CPIC Investment Management even launched two cryptocurrency funds in April.
However, as Lesperance notes, the crypto market in mainland China is still effectively shut down, and Chinese clients using Hong Kong exchanges to get money out of China could face enforcement concerns.
“Certainly, the authorities will try to stop this leakage,” said Lesperance.
Zhou also stated that crypto exchanges in Hong Kong have strict Know Your Customer policies, which aim to restrict mainland Chinese investors on their platforms. “I don’t expect any licensed crypto exchanges in Hong Kong to accept onshore mainland citizens to trade in the exchanges,” he noted.
Despite the challenges faced by cryptocurrency adoption in mainland China, Hong Kong continues to make progress in embracing digital currencies, with local businesses and government entities exploring their potential. However, it remains to be seen how the geopolitical tensions between China and Hong Kong will impact the future of cryptocurrency in the region. As the world continues to navigate the complex landscape of digital currencies, investors and regulators must carefully consider the opportunities and risks associated with this emerging asset class.