The 2021 ban on all forms of cryptocurrency trading in China significantly impacted the global crypto markets since China had one of the largest cryptocurrency markets. Despite its official ban four years earlier, online foreign exchange continued in the country. Still, it was only significantly affected after the government’s stringent crackdown on all forms of cryptocurrency trading.
With the recent regulations in Hong Kong that have paved the way for the trading of digital assets in the country’s financial hub, there has been a massive influx of Chinese visitors looking for opportunities outside of China’s anti-crypto regulations. To understand the recent efflux of Chinese visitors to the Special Administrative Region, we’ll have to look at Hong Kong’s contemporary crypto appeal. First, a little history of China’s anti-crypto legislation is essential.
History of Crypto Legislation in China
In 2018, the Chinese government placed a ban on cryptocurrencies in a bid to curtail financial risks. Certain activities like mining, trading, and purchases of crypto assets were still going on in the country, and it wasn’t until September 2021 that a complete ban on all activities involving crypto assets was enforced.
Before now, China had a significant role in Bitcoin mining, with the country responsible for the most significant percentage globally. This made it a major player in the global cryptocurrency markets, and the ban profoundly impacted the market.
Although possessing bitcoin and certain digital assets is still legal in the country, its anti-crypto stance poses a significant problem for Chinese crypto enthusiasts, miners, traders, and potential investors. This has formed the basis for the rapid efflux of Chinese visitors to Hong Kong.
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Crypto Legislations in Hong Kong
Despite its role as the Special Administrative Region of China, Hong Kong’s regulatory stance on cryptocurrencies and Web3 are significantly different from mainland China’s. Hong Kong has majorly been pro-crypto, with policies that allow for the promotion and widespread adoption of cryptocurrencies. Over the past year, its legislation has allowed retail investors to invest in crypto assets directly. The government of Hong Kong has introduced a bill that will enable it to regulate cryptocurrencies, independent of China’s ban. This adoption has shown that many crypto-related projects are thriving, and there’s widespread interest in the region.
In March of 2023, several crypto firms surged with interest in establishing a base in Hong Kong. The Hong Kong Monetary Authority (HKMA), the region’s banking regulatory body, further backed this interest. The body encouraged banks to provide services to these firms.
In May, the Fintech Association of Hong Kong launched a new policy to ensure crypto service providers could offer retail services to the public as long as they operated with a license regime. This took effect on June 1st, and many notable establishments in the state have taken advantage of this opportunity. All these pro-crypto regulations in the region have brought significant interest from Chinese crypto enthusiasts, who are still primarily limited by China’s anti-crypto laws. To find out more about crypto regulations, click here.
China’s Interest in Hong Kong’s Pro-Crypto Environment
Reports have shown a peculiar trend amongst many Chinese tourists in Hong Kong, there is a significant rise in the region’s purchase and use of cryptocurrencies. These visitors frequent crypto stores and shops, where they can easily purchase digital assets with cash without stringent rules or a need for tightly regulated Know Your Customer (KYC) verification procedures.
The interest from China isn’t limited to these tourists. Corporate bodies like various Chinese banks have also shown interest in participating in the region’s cryptocurrency revolution. Their affiliation with the different crypto firms in the area is a remarkable proof of that. Which Chinese corporations are majorly involved?
Major Chinese Players Involved
The major Chinese players involved are the banks. Many of the Chinese state-affiliated banks in the country have shown active interest in partnering with Hong Kong crypto firms. Banks like ZA Bank of Communication are the go-between for various crypto companies. They offer services like fiat withdrawal and deposition to these companies’ user base and act as settlement banks for licensed crypto exchanges. This partnership benefits the users by providing an easy and legal way for users to withdraw fiat currencies after depositing tokens.
Top Cryptocurrency Investments in Hong Kong
Since retail investors were licensed to trade and exchange crypto assets, a particular set of Chinese-based altcoins became among the popular options. While the major cryptocurrencies by market cap are trade mainly, the following set of altcoins is also a popular investment for retail traders:
- Filecoin (FIL).
- Alchemy Pay (ACH).
- NEO.
- Conflux (CFX).
- VeChain (VET).
Conclusion
With Hong Kong’s recent pro-crypto stance and China’s growing interest, there have been speculations that the country might someday adopt a more lax view on involvement with crypto assets. While it doesn’t look like China is ready to reverse its anti-crypto agenda, its involvement in Hong Kong’s foray into digital currencies proves hopeful. As one of the major players in the global cryptocurrency markets, relaxing their laws is bound to impact the market in the long term significantly.
Frequently Asked Questions
Can People in China Trade Cryptocurrencies?
China’s ban on crypto has illustrated how tricky crypto bans can be. While China has put a lid on all forms of cryptocurrency trading, enforcing this in specific scenarios might be problematic if certain exchanges don’t filter out Chinese passports.
What Cryptocurrencies Are Available to Trade in Hong Kong?
Bitcoin, Ethereum, and other major-cap cryptocurrencies can be traded on various exchanges. Trading is not limited to just these few coins, as several Chinese-based altcoins are popular. As stated earlier, some of these include FIL, ACH, and CFX.
What Is the Penalty for Trading Cryptocurrencies in China?
If found guilty, offenders stand a chance of getting jail time for up to 10 years and a fine of up to 500,000 Yuan (Worth about $79,000). Of course, the penalty varies depending on the amount of cryptocurrency involved in the case.