China May Be Considering a Crypto Comeback
China might be reconsidering its stance on cryptocurrencies as one of its neighboring countries, Hong Kong, embraces blockchain technology. According to a report by blockchain data platform Chainalysis, the volume of crypto transferred to Hong Kong in the past year has been comparable to that transferred to mainland China, even though Hong Kong’s population is only 0.5% of China’s.
The report states that between July 2022 and June 2023, Hong Kong received an estimated $64 billion in crypto transactions, while China received $86.4 billion during the same period. This indicates that Hong Kong is an active crypto market with significant transaction volume.
Hong Kong Promotes Web3 Development
While China implemented strict bans on cryptocurrencies in 2021, Hong Kong has taken a different approach by actively promoting Web3 development. The region has adopted a policy framework that subjects crypto and traditional financial services to the same regulatory standards. Additionally, it granted its first retail crypto exchange license to HashKey in August.
This shift in approach may suggest that the Chinese government is becoming more open to crypto initiatives or even reversing its position on digital assets, as noted by Chainalysis.
Different Types of Transactions
Most crypto activity in both China and Hong Kong remains “over the counter” (OTC), primarily for large institutional transfers. However, there are some differences in transaction types between the two regions.
In China, a greater share of volume comes from “retail” transactions (under $10,000) at 8.5%, compared to Hong Kong’s 4%. China also has a higher percentage of “professional” size transfers (between $10,000 and $1 million) at 34.8%, while Hong Kong has 25.1%.
Interestingly, centralized exchanges account for the majority of crypto activity in China (73.5%), whereas Hong Kong is more connected to decentralized finance (DeFi) with 68.3% of its activity linked to DeFi.
China’s Approach to Crypto Bans
Chainalysis Head of APAC Policy Chengyi Ong explained that China’s blanket bans on crypto transactions have not been effective or well-enforced. Crypto activity remains substantial, indicating that clear regulatory frameworks would be more beneficial in protecting users and enabling safer engagement with digital assets.
Overall, Eastern Asia accounted for 8.8% of global crypto activity during the analyzed period.
Hot Take: China Reevaluating Its Stance on Cryptocurrencies
The recent surge in crypto volume transferred to Hong Kong compared to mainland China suggests that China may be reconsidering its strict stance on cryptocurrencies. While China implemented bans on crypto in 2021, Hong Kong has embraced blockchain technology and actively promotes Web3 development. This shift could indicate that the Chinese government is becoming more open to crypto initiatives or even reversing its position on digital assets. However, it is crucial for clear regulatory frameworks to be established to protect users and facilitate safer engagement with digital assets. The growing crypto activity in Eastern Asia highlights the region’s significance in the global cryptocurrency landscape.
Source: Chainalysis
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