China could warm up to crypto through Hong Kong’s OTC market: Chainalysis

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By BitcoinWiki News

Key Takeaways:

  • China may be warming up to crypto through Hong Kong’s active over-the-counter crypto market.
  • Hong Kong’s growing status as a crypto hub suggests that the Chinese government may be reversing its stance on digital assets.
  • Hong Kong ranked fifth in crypto transaction volume in East Asia, receiving $64 billion in crypto between July 2022 and June 2023.
  • Speculation has arisen that the Chinese government may be more open to cryptocurrency, with Hong Kong serving as a testing ground.
  • Hong Kong has autonomy over many aspects of policy, including cryptocurrency regulation, as a Special Administrative Region of China.
  • Hong Kong’s active over-the-counter market and unique breakdowns in most-used crypto platform types suggest a thriving crypto ecosystem.
  • China banned crypto transactions on the mainland in September 2021, but cryptocurrency has been viewed as property regarding ownership by local courts.
  • In contrast to mainland China, Hong Kong has welcomed crypto firms and encouraged banks to work with them.
  • Hong Kong has implemented policies and licensing regimes to strengthen its position as a global financial center for cryptocurrencies.
  • Ethereum co-founder, Vitalik Buterin, advises crypto projects to consider the stability of crypto-friendliness when establishing a presence in Hong Kong.

China could be changing its stance on cryptocurrencies as Hong Kong’s active over-the-counter (OTC) crypto market indicates a warming relationship between the two, according to a report by Chainalysis. Despite crypto bans in mainland China, Hong Kong ranked fifth in crypto transaction volume in East Asia, receiving an estimated $64 billion between July 2022 and June 2023. The report suggests that Hong Kong’s growing status as a crypto hub may be a sign that China is becoming more open to digital assets. Recent developments have fueled speculation that the Chinese government sees Hong Kong as a testing ground for crypto initiatives, as the region has autonomy over aspects of policy, including regulation. However, the report highlights that the use of OTCs and informal, grey market peer-to-peer businesses may affect the accuracy of crypto platform usage data. While China banned crypto transactions on the mainland, Hong Kong has embraced crypto firms and encouraged banks to work with them. The authorities in Hong Kong released policy statements on cryptocurrencies in 2022 to strengthen the region’s position as a global financial center, and in December of that year, a licensing regime for virtual asset service providers was introduced. However, crypto projects are advised to carefully consider the stability of crypto-friendliness in Hong Kong, as noted by Ethereum co-founder Vitalik Buterin.

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