Hong Kong is seen as a hotbed of cryptocurrency adoption, but mainland China’s regulatory stance on cryptocurrencies has not changed. State-affiliated banks in China have opened bank accounts to serve crypto clients in Hong Kong, and even launched cryptocurrency funds, but this does not signal a shift in the Chinese government’s approach to regulating Bitcoin (BTC) anytime soon, according to Chenganag Zhou, CEO of CPIC Investment Management. Even though the firm is backed by the China government and operates as a Hong Kong entity regulated by the Securities and Futures Commission, Zhou believes that the government’s anti-crypto stance will not change in the near future.
Hong Kong’s regulations allow firms like CPIC Investment Management to invest in different markets, asset classes, or products like cryptocurrencies, but Zhou emphasizes that the company’s expansion into the crypto space is in no way a reflection of a change in policy by the Chinese government towards cryptocurrencies. China has maintained an anti-crypto stance for a long time, even after banning cryptocurrencies entirely in September 2021, according to Zhou. He doesn’t expect the local government to change its crypto policies in the foreseeable future.
Many believe that China is trying to boost its foreign currency deposits, whether that is fiat to purchase crypto or the crypto itself, rather than allowing domestic Chinese customers to enter the crypto market. The crypto market in mainland China is still effectively shut down, and while attracting foreign customers to Hong Kong exchanges, authorities will try to prevent Chinese clients from using Hong Kong exchanges to get money out of China. The lawyer Lesperance notes, “they are bifurcating the markets to shut out domestic Chinese customers but attracting foreign customers.”
While Zhou expects licensed crypto exchanges in Hong Kong to restrict mainland Chinese investors on their platforms, this is just one hurdle that Chinese investors face. As the Chinese government continues to crack down on the financial sector, it’s hard to imagine it loosening its grip on controlling Chinese nationals’ use of crypto. Despite Hong Kong’s efforts to promote Web3 and cryptocurrencies, there has been no indication that China’s attitude towards crypto will shift in the near future.
In conclusion, Hong Kong’s cryptocurrency adoption may be slow and steady, but mainland China’s stance on the issue has not changed. Therefore, it’s crucial for investors looking to enter the crypto market in China to consider the strict regulatory and legal hurdles they’ll face.