Companies that deal in cryptocurrencies are swarming to Hong Kong in the hopes that the city's public drive to become a hub for digital assets would help them meet mainland Chinese demand for buying and selling tokens.
Several businesses believe that Hong Kong is more crypto-friendly than Singapore, a rival city-state that cracked down on the industry last year following a number of high-profile failures. The city is preparing a brand-new set of exchange regulations and legalizing cryptocurrency trading for retail investors.
In spite of Beijing's 2021 ban on the industry, businesses expanding in Hong Kong are looking to capitalize on the country's rising demand for trading digital currency. China is still the world's fourth-largest crypto market.
"A lot of the Chinese capital is looking for smarter, safer ways to invest . . . being in Hong Kong naturally makes more sense than anywhere else," according to Henry Liu, chief executive of cryptocurrency exchange BTSE, which announced this month that it intended to apply for a license in the city.
The exchanges KuCoin, Gate.io, and Huobi, which announced plans to relocate its headquarters from Singapore in February, are among the other businesses that intend to establish or extend their presence in Hong Kong.
The largest cryptocurrency exchange in the world, Binance, which was established in China, is now posting multiple Chinese-speaking job openings in Hong Kong on LinkedIn.
According to the association, the city had "a competitive position when it comes to the business environment."
With regulatory approval from a top tier financial hub, Hong Kong will provide a channel for them to get legal access to the Chinese market, as seen by the rise of cryptocurrency companies. In their minds, Beijing probably gave the go-ahead for Hong Kong's easing.
"Chinese blockchain companies are very bullish on Hong Kong," according to Cyrus Ip, a partner at web3 investor Newman Capital in Hong Kong. He claimed that although some mainland traders used VPNs to bypass Chinese regulations, they still had trouble converting their cryptocurrency winnings back into local currency. In Hong Kong, it is possible to convert cryptocurrency to physical cash.
"You can use a VPN . . . but from the Chinese perspective it’s not the most legitimate way to do it. So if Hong Kong can provide a legitimate way . . . they don’t need to do it under the table."
In 2021, China made all cryptocurrency-related operations illegal, and it has since worked to outlaw the usage of foreign exchanges. Traders are still working, though.
According to blockchain research company Chainalysis, mainland China ranked as the fourth-largest cryptocurrency market in the world in the year leading up to July 2022. Over that time, investors made about $220 billion in transactions.
According to the present regulations, exchanges are legally obligated to make sure that retail consumers are not accessing their platforms from countries where cryptocurrency trading is prohibited, according to Hong Kong's Securities and Futures Commission.
Yet, a lot of cryptocurrency business owners think Hong Kong's embrace of cryptocurrency is an indication that China would eventually relax restrictions.
According to Justin Sun, the creator of the Tron blockchain network and a member of Huobi's board, the exchange plans to increase its Hong Kong presence from 70 to 200 this year in the hope that the city will gain from increased Chinese demand.
"This was one of the most important roles for Hong Kong in the first place . . ."
"As long as, for example, now you are based in Hong Kong, you can trade Hong Kong-listed Tencent stocks. I believe this is also going to happen in cryptocurrencies," he said.
This week, Sun was accused of fraud by the US SEC. "We believe the complaint lacks merit," Sun wrote on Twitter.
By fLEXI tEAM