Hong Kong's Crypto Initiatives Raise Hopes for East Asian Market Revival
Summary:
Hong Kong's recent crypto-related initiatives and industry-friendly regulations seem to be boosting crypto activity in East Asia, according to a report from Chainalysis. The report noted that despite a population of just 0.5% the size of mainland China, Hong Kong's crypto transactions between July 2022 and June 2023 stood at an estimated $64 billion, near China's $86.4 billion. It points to a rising sense of optimism and speculates that Hong Kong might serve as a proving ground for broader cryptocurrency acceptance in China. However, experts advise caution in viewing Hong Kong's crypto enthusiasm as an indication of China's overall stance towards digital currencies.
The latest developments in cryptocurrency in Hong Kong may provide a boost to the sluggish crypto dynamics in East Asia, an area that has been affected by a trading ban implemented by China since 2019. From July 2022 to June 2023, the overall value of crypto activities in East Asia only consisted of 8.8% of the global share, according to a Chainalysis report on October 2. This places it as the fifth most active crypto market. Nevertheless, Chainalysis suggests that recent initiatives in Hong Kong may foster growth in this sector. The report hinted at a rising optimism fueled by numerous crypto-friendly policy changes in Hong Kong.
Chainalysis data indicates that East Asia's percentage of the total value of crypto transactions dropped from about 30% in 2019 to under 10% by the second quarter of 2022 due to China's sweeping bans on crypto-related activities. Despite this, Chainalysis maintains a positive outlook for Hong Kong, pointing out that the city's crypto market is remarkably active in terms of transaction volume despite its much smaller population size. The city reportedly had an estimated $64 billion in crypto transactions from July 2022 to June 2023, in contrast to China's $86.4 billion, even though it has only 0.5% of China's population size.
According to Merton Lam of CryptoHK, a Hong Kong digital asset trading center, there's a growing interest in cryptocurrencies among local banks, private equity firms, and high-value investors that they engage with. Several Chinese state-owned enterprises have also recently set up investment funds focused on cryptocurrency.
OSL Digital Securities' Dave Chapman, however, suggested caution in assuming that Hong Kong's favorable stance towards crypto signals a change in China's overall policy towards the digital currencies. He advised considering this as an initial step towards gaining a better understanding of digital assets without necessarily having to loosen policies on the mainland.
Markus Thielen, Head of Research and Strategy at Matrixport, proposed considering Hong Kong as an experimental platform for broader crypto adoption in China. He also stressed that Hong Kong's earnest endeavors to attract the crypto asset management industry — an area other jurisdictions have largely failed to attract — could be a significant advantage going forward.
Published At
10/3/2023 4:55:32 AM
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