A recent report by Chainalysis suggests a possible resurgence of crypto activity in East Asia, fueled in part by Hong Kong’s adoption of crypto-friendly policies. Eastern Asia, currently ranking fifth in global digital asset activity, contributes to 8.8% of the global market from July 2022 to June 2023. However, the imposition of a stringent ban on crypto trades in China since 2019 has led to a significant decline in the region’s crypto activities.
Interestingly, despite the overall downturn, Hong Kong seems to be a shining beacon against this fading backdrop. The city has rightfully earned its place as the fifth largest in terms of crypto transaction volumes within East Asia, achieving a staggering $64 billion transaction volume between July 2022 and June 2023. A significant contributor to Hong Kong’s robust performance is its active over-the-counter (OTC) market, favoured by institutional investors and high-net-worth individuals for facilitating large transfers.
Institutional transactions, defined as those exceeding $10 million, made up a considerable 46.8 percent of Hong Kong’s crypto trades in the past year, with retail transactions below $10,000 following at 4 percent. The city’s regulations have enabled retail crypto trading within a regulatory framework since October of the previous year, offering strong investor protections and permitting licensed exchanges to provide services to retail investors.
But Hong Kong’s journey didn’t stop there. In a remarkable move in 2021, Hong Kong announced plans to license and regulate crypto exchanges, placing itself ahead of major Asian economies. This stride stands in stark contrast to mainland China’s approach, which saw the implementation of a crypto transaction ban in the same year.
Fast forward to October 2022, Hong Kong issued policy statements underlining its commitment to positioning itself as a global financial hub. In contrast to China’s more stringent regulations, the city even encourages banks to actively collaborate with crypto firms, and an amendment was approved by the Legislative Council of Hong Kong, introducing a comprehensive licensing framework for virtual asset service providers.
Chainalysis theorizes that Hong Kong’s forward-thinking stance when it comes to crypto regulations might influence crypto activity within East Asia. With a reputation as an influential financial hub, Hong Kong’s welcoming policies could make it an enticing destination for crypto businesses and investors alike. This could further prompt other countries in the region to consider adopting similar approaches, fostering a more crypto-friendly regulation environment.
Source: Cryptonews
