The low-key support shows that officials are keen on using the laissez-faire city as a testing ground for digital assets as they keep a tight rein on any such activity on the mainland. — Bloomberg
HONG KONG: In October, Hong Kong rolled out the red carpet for crypto businesses to help revitalise the embattled financial hub.
Signs are now emerging that the push has under-the-radar backing from Beijing, providing impetus for mainland Chinese firms to return.
Representatives from China’s Liaison Office and other officials have been frequent guests at the city’s crypto gatherings over the past months, swapping business cards and WeChat details, said people familiar with the matter, who asked not to be named because they were discussing private information.
The encounters have been friendly, with officials checking on developments, asking for reports, and in some cases making follow-up calls, the people said.
The Liaison Office, the top mainland body based in Hong Kong, didn’t respond to a request for comment.
Local crypto operators say their presence is clearing up any doubts about Beijing’s attitude towards Hong Kong’s efforts to become a crypto hub.
The low-key support shows that officials are keen on using the laissez-faire city as a testing ground for digital assets as they keep a tight rein on any such activity on the mainland.
Mainland and overseas firms are taking the cue, pushing to register their businesses and planning a return to Chinese territory 15 months after Beijing slapped a ban on the industry and forced many to set up shop abroad.
“As long as one does not violate the bottom line, to not threaten financial stability in China, Hong Kong is free to pursue its own pursuit,” said Nick Chan, a member of the National People’s Congress and a lawyer who advises on cyber-security and digital assets.
On Monday, the city outlined a further opening to crypto, releasing a plan to let retail investors trade digital tokens like bitcoin and ether.
Individual investors would be allowed to trade larger coins on exchanges licenced by the Securities and Futures Commission, provided safeguards such as knowledge tests, risk profiles, and reasonable limits on allowable exposure are put in place, the regulator said in a consultation paper.
China started its crackdown on crypto in 2017 and banned trading in 2021, leading some of its biggest homegrown names, such as Binance and Tron, to exit the country.
Only recently did the world’s second-largest economy ease its grip on the development of the blockchain technology behind these digital assets, allowing some non-fungible tokens to be developed.
For now, there is little indication that Beijing will relax its own ban amid concern about consumer protection, the use of crypto to evade capital controls, and environmental damage from the energy consumed by bitcoin mining.
The mainland representatives are reporting their findings in Hong Kong to superiors in mainland China, although the purpose of those reports isn’t clear, the people said.
“As long as it’s still under the party’s control, there will be no U-turn on China’s crypto policy,” said He Yihan, founder and chief executive officer of state-backed blockchain firm Red Date Technology.
“It does no good to the real economy.”
In recent months, Chinese officials have been explicit in their endorsement of Hong Kong’s ambitions to become a fintech hub.
Yi Gang, governor of the People’s Bank of China, delivered addresses at key Hong Kong events on China’s development of its central bank digital currency and close cooperation with the Hong Kong Monetary Authority.
Hong Kong’s renewed interest in crypto came at a tumultuous time as industry stalwart FTX collapsed and contrasted with tightening rules in rival Singapore. — Bloomberg
