Cryptocurrency and Hong Kong have an on-again, off-again romance. The Asian financial powerhouse was the early home to numerous cryptocurrency businesses, including the now-defunct FTX, which fled for the Bahamas following the ban and before China prohibited all crypto-related activity in 2021. Hong Kong is currently accepting cryptocurrency entrepreneurs once more, but with clearer regulations this time.
China’s anti-crypto stance
Hong Kong made its desire to legalise cryptocurrency retail trading and establish a licencing system for producers of digital assets known during its government-sponsored technology week in the latter part of last year. The strategy gained additional traction in February when the city unveiled proposed regulations that would start allowing private investors to trade some of the biggest cryptocurrencies on June 1.
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Businesses have already reacted to the attitude change in the city. Almost 80 virtual asset-related enterprises from both mainland China and outside have “expressions of interest” in setting up shop in Hong Kong as of February, according to the department for foreign direct investment. One of the biggest cryptocurrency exchanges in the world, KuCoin, said last year that it will establish a presence there.
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While some see these changes as positive indicators, others wonder if the semi-autonomous area has the proper environment to support the growth of all types of web3 organisations and enterprises. The early assumption is that businesses involved in crypto trading would likely be the first to benefit from the shift in regulation.
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Too big to miss
Beijing adopted a “one country, two systems” rule after Hong Kong was returned to China in 1997, giving the city a considerable degree of autonomy in the legal, economic, and social spheres. Multinational corporations opened offices there as a point of entry into China, while export-oriented Chinese companies started exploiting the city as a logistics and clearance hub. However, in recent years, political controversies and strict COVID regulations have caused Hong Kong to lose some of its appeal as a gateway between China and the outside world.