The rise of Hong Kong as a global leader in the regulated digital asset market, while intriguing, poses several questions regarding its implications for China as a whole, possibly insinuating an “evolution” in Beijing’s approach to the industry. Nevertheless, the firm Chainalysis implies that these developments could serve as an inconspicuous source of progress.
Eastern Asia has seen a remarkable nosedive in crypto activity over the last few years, with its current global share standing at 8.8% between July 2022 and June 2023. Not too long ago, in 2019, this same region was at the pinnacle of the crypto market by transaction volume, driven primarily by China’s robust trading and mining sector. However, as Beijing tightened its grip on digital assets, the value of the country’s crypto transactions witnessed a significant fall.
Yet, bucking this trend is Hong Kong, which having launched several crypto initiatives and enacted industry-friendly regulations over the past year, is now seen as a potential source of optimism. Added to that is the conjecture that Beijing may be developing a softer stance towards crypto, with Hong Kong possibly being its petri dish for the experimentation. Dave Chapman, founder of Hong Kong-based OTC firm OSL Digital Securities, points out that support from Chinese state-backed entities for Hong Kong’s Web3 ventures might well hint at a more tentative, exploratory approach towards digital assets, without needing to ease mainland policies.
With a transaction volume reaching $64 billion annually, Hong Kong has emerged as a dynamic crypto market, close on the heels of mainland China’s $86.4 billion, despite the former’s population being a mere 0.5% of the latter’s. The majority of this activity can be accredited to Hong Kong’s lively over-the-counter (OTC) market.
From a global perspective too, Hong Kong seems to be gaining traction. Merton Lam, founder of Hong Kong-based OTC firm CryptoHK, asserts that his company has seen an influx of foreign users, especially from unstable economies or those wrestling with stringent capital controls. He cites the increasing numbers of Russians and Ukrainians moving their money to safety by means of crypto. It’s not just a strategy for the uber-wealthy, he shares, but a refuge for the ordinary man as well.
With its increasing ascendancy in the crypto market, Hong Kong seems to open up multiple opportunities, posing a fascinating paradigm for a re-evaluation of Beijing’s evidently rigid stance on digital currencies.
Source: Cryptonews
