Beijing Using Hong Kong as Crypto Testing Ground: Report

Beijing is subtly supporting Hong Kong’s ambitions to become a digital asset hub as officials keep tabs on developments in the special administrative region.

Over the past few months, representatives from China’s Liaison Office and others have regularly attended crypto meet-ups in the city in the past few months, Bloomberg reported Tuesday. 

They were said to have exchanged business cards and WeChat information to keep in touch for friendly follow-up calls and reports.

The Liaison office, meant to play a facilitator role in economic integration with Mainland China, didn’t return Blockworks’ request for comment by press time.

This toned-down support that Beijing seems to be extending shows China might want to use Hong Kong as a “testing ground” for digital assets.

Hong Kong in October mulled giving retail investors “a suitable degree of access” to virtual assets, in a move that was expected to rebuild its image as a fintech hub. 

A somewhat restricted environment in the city prompted local firms to move and set up shop in other cities including Singapore and Dubai.

Hong Kong appears to be reviving the industry by looking at lifting a ban on retail crypto trading, although in a regulated manner. A consultation paper released Monday shows crypto trading platforms operating in the city must be approved by the Securities and Futures Commission by June 2024, or risk closing down operations. 

Meanwhile, trading and mining crypto in mainland China was banned in Sept. 2021 as the government considered related activities as a threat to financial stability, as well as its environmental goals.

Nick Chan, a member of China’s national legislature and a cybersecurity lawyer, reportedly said Hong Kong is free to explore its own pursuits under the “One Country, Two Systems” policy, just as long as it doesn’t threaten financial stability in China.

Despite China’s crackdown, local crypto trading had picked up toward the last few months of 2022 as traders found loopholes in restrictions.

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