Despite crypto bans on the mainland, a report by Chainalysis suggests that the Chinese government might be reevaluating its stance on digital assets. The speculation arises from Hong Kong’s increasing role as a crypto hub a growing connection between China and Hong Kong. Recent developments fuel the speculation that China might be using Hong Kong as a testing ground.
“The increasingly close relationship between China and Hong Kong leads some to speculate that Hong Kong’s growing status as a crypto hub may signal that the Chinese government is reversing course on digital assets, or at least becoming more open to crypto initiatives,” an excerpt from Chainalysis’ 2023 Geography of Cryptocurrency Report, scheduled for release in October, said.
According to the report, Hong Kong secured the fifth position in East Asia for crypto transaction volume between July 2022 and June 2023, with an estimated $64 billion received. Remarkably, this figure is not far behind China’s $86.4 billion during the same period, even though Hong Kong’s population is only 0.5% the size of mainland China’s.
Chainalysis emphasizes the significance of Hong Kong’s active OTC market, influencing transaction volume based on size. It also notes that both mainland China and Hong Kong exhibit distinctive patterns in the most-used crypto platform types.
However, the report cautions that these numbers may be influenced by significant crypto activity occurring through OTCs or informal peer-to-peer channels in both regions.
China imposed a ban on crypto transactions in September 2021, but local courts have ruled that cryptocurrency should be treated as property. In contrast, Hong Kong has embraced crypto firms, encouraging collaboration with banks. The region’s proactive approach is evident in policy statements released in October 2022 and the establishment of a licensing regime for virtual asset service providers in June.
