Hong Kong could become the next crypto hub – here’s why
Hong Kong in particular seems extremely positive towards the digital asset industry. While financial watchdogs in the US continued to rein in the crypto industry, Hong Kong authorities have opened the doors to crypto trading.
On February 19, co-founder of Gemini crypto exchange Cameron Winklevoss stated that the next crypto bull run would begin in Asia. His statements come against the backdrop of several regulatory decisions against crypto firms in the United States.
For example, on February 9, the SEC cracked down on crypto staking-as-a-service, forcing Kraken, the third largest crypto exchange in the world, to shut down its staking platform and cough up a $30 million fine. A few days later, on February 14, the SEC and the New York State Department of Financial Services (NYDFS) came down on stablecoins, ordering crypto firm Paxos to stop minting the Binance USD (BUSD) coin.
On the other hand, several countries in Asia are embracing cryptocurrencies and blockchain technology. Hong Kong in particular seems extremely positive towards the digital asset industry. While financial watchdogs in the US continued to rein in the crypto industry, Hong Kong authorities have opened the doors to crypto trading. This proposal is part of several policy changes put together that will position Hong Kong as a financial hub for digital assets. The government has also invited industry insiders and crypto experts to weigh in on the new guidelines until March 31.
This is in stark contrast to China, which banned crypto transactions in September 2021. This forced the country’s large web3 and crypto cohort to move to other countries such as Dubai and Singapore. However, many companies still hire developers from the mainland thanks to the vast pool of technical talent. And with Hong Kong warming up to the digital asset industry, more crypto companies may be moving base closer to home.
The popular crypto exchange, Huobi, has already announced its intentions to start operations in Hong Kong. In a recent interview, Justin Sun, an advisor to the exchange, announced that Huobi had applied for a license to offer crypto trading services in Chinese territory. Sun also stated that the firm’s Asia headquarters would be moved from Singapore to Hong Kong.
“Huobi is excited about Hong Kong’s pro-crypto policy and we are working hard to secure our crypto license there. We aim to be one of the first fully compliant exchanges in HK and work with our Asia Pacific users to drive the growth of digital assets,” Huobi said in a February 20 tweet.
In an October 2022 blog post, former CEO of crypto derivatives giant BitMEX, Arthur Hayes, also predicted that the next bull run would start in Asia, specifically when China moves back into the market. However, he also stated that Hong Kong would play an important role in China’s crypto resurgence.
Hayes explained that Hong Kong would serve as a litmus test for Beijing’s crypto efforts and would act as a hub, channeling Chinese capital into global markets. “Beijing allows Hong Kong to exist this way because it is beneficial for the country to have controlled openness. As we all know by now, Hong Kong is part of China. Hong Kong has no real economy other than being a gateway to China, with some softness around the edges, Hayes said in his blog.
Adding to this narrative, a Bloomberg article says Beijing will quietly support Hong Kong’s crypto efforts. According to this article, Chinese officials have visited crypto collections in Hong Kong. Many see this as Beijing’s tacit endorsement of HK’s push to become a crypto hub. It also reinforces the notion that China sees its laissez-faire city as a testing ground for open crypto markets. This is similar to how Hong Kong served as China’s first test of open markets in the 20th century.
Hong Kong’s Financial Secretary Paul Chan also unveiled the city’s 2023 budget yesterday, 22 February. In his speech, Chan highlighted the importance of web3 and the opportunities it can provide. “The third-generation Internet (Web3), which is currently in its infancy, has the same enormous potential. We must keep up with the times and seize this golden opportunity to be at the forefront of innovation development,” he said. In the same speech, Chan also granted 50 million Hong Kong dollars, which is about US$6.37 million, for the development of a Web3 hub at Hong Kong’s creative digital community Cyberport.
In a study published by Forex Suggest, Hong Kong was also declared the “best prepared country” for crypto adoption in July 2022. The study takes into account factors such as crypto ATM installations, pro-crypto regulations and startup culture. And now, with government support, enthusiasm from crypto firms and possible support from Beijing, Hong Kong is truly on its way to becoming a global crypto hub.
