June 23, 2024

Officially known as the Hong Kong Special Administrative Region of the People’s Republic of China, this bustling city of over seven million residents has long been recognized as a major world economy and a center for investment and trade in the region. Renowned for its pro-innovation and technology environment, Hong Kong has recently taken significant steps towards becoming the global hub for cryptocurrencies, embracing their potential with open arms.

While China has maintained a strict anti-crypto stance for several years, Hong Kong has charted its own course by introducing progressive crypto legislation, allowing retail investors to directly engage with crypto assets. As most Western countries remain cautious about cryptocurrencies, Hong Kong has emerged as a frontrunner, positioning itself as a crypto-friendly jurisdiction.

In January 2023, amidst the turmoil in the crypto industry following the FTX crisis, Hong Kong’s Financial Secretary Paul Chan expressed the government’s commitment to building a thriving crypto and fintech ecosystem within the year. Just days after Chan’s statement, Korean tech giant Samsung made a groundbreaking announcement, launching a Bitcoin Futures Active ETF on the Hong Kong Stock Exchange. This move sent a clear message to the global crypto community that Hong Kong is serious about its ambitions.

Sources revealed in mid-February that Chinese officials were giving tacit approval to Hong Kong’s pro-crypto efforts. While mainland China remains cautious to protect its financial stability, Hong Kong has the potential to serve as a test bed for crypto innovations without threatening the broader financial system. This acknowledgment from Chinese authorities has sparked significant interest, with more than 80 crypto firms expressing their intention to open offices in Hong Kong by March.

To further bolster the crypto ecosystem, the Hong Kong Monetary Authority (HKMA), the region’s central banking institution and regulator, called on banks to provide services to cryptocurrency firms. This proactive approach, along with the announcement from the Hong Kong Securities and Futures Commission (SFC) allowing licensed crypto platforms to serve retail customers, demonstrates the commitment to creating a favorable environment for crypto businesses.

Leading crypto exchanges Huobi and Gate.io have already applied for virtual asset licenses in Hong Kong, signaling their belief in the region’s potential. Huobi, the first member of the Hong Kong Virtual Assets Consortium, opened its retail trading services while submitting its license request to the SFC. Gate.io, operating as a custodian in Hong Kong since August 2022, emphasized the rigorous requirements set by the SFC, highlighting the need for top-tier service providers to comply with financial and operational standards.

Industry giants like Binance and Bitfinex are closely monitoring developments in Hong Kong, recognizing the significance of regulatory clarity for the crypto sector. Binance, the largest global crypto exchange, has actively participated in the policy-making process and welcomes Hong Kong’s progressive approach. Bitfinex also views the favorable regulations as a catalyst for innovation and growth, emphasizing the importance of democratizing access to the crypto marketplace. Legislative Council member Johnny Ng mentioned in a Twitter post that Hong Kong expresses support and assistance to “all global virtual asset trading operators” like Coinbase. He also made references to potential stock listing opportunities.

Hong Kong’s autonomous status within China has allowed it to diverge from the country’s anti-crypto stance, making it an attractive destination for crypto enthusiasts and businesses seeking opportunities. Chinese banks, such as Shanghai Pudong Development Bank, the Bank of Communications, and the Bank of China, have shown interest in providing banking services to cryptocurrency enterprises in Hong Kong, reflecting the growing appeal of the region.

Vivien Khoo, co-founder and chairwoman of the Asia Crypto Alliance, highlights the distinction between crypto and Web3 when considering the relationship between Hong Kong and mainland China. While mainland China banned cryptocurrencies, it remains optimistic about the potential of Web3 and blockchain technologies. Hong Kong’s enthusiasm for Web3 aligns with China’s broader digital finance industry, setting the stage for continued growth in Greater China.

As Hong Kong’s crypto landscape evolves within the framework of “one country, two systems,” it emerges as a stage for Chinese founders, venture capitalists, institutions, and exchanges to explore the industry’s frontiers. Meanwhile, China mainland maintains its policy under the central bank’s guidance to control crypto prevalence, leading to exchanges relocating their operations to Hong Kong, Thailand, Singapore, and other favorable jurisdictions.

Changpeng Zhao, CEO of Binance, believes that Hong Kong’s developments, particularly the inclusion of retail traders, could become a driving force behind the next bull run in the crypto market. The city’s progressive approach and growing ecosystem set the stage for Hong Kong to realize its vision of becoming the crypto capital of the world, fostering innovation and shaping the future of digital assets.

The recent crackdown on cryptocurrency by the US government is sparking the mass exodus to markets such as Hong Kong, this will certainly benefit innovation and growth in the space elsewhere if the USA does not rethink it’s position. In particular beneficiaries of this crackdown will be Hong Kong, Singapore, and Switzerland.

Hong Kong has a long history of financial innovation and is seen as a welcoming environment for cryptocurrency businesses. The city has a strong regulatory framework for financial services, but it is also relatively open to new technologies. This makes Hong Kong an attractive place for cryptocurrency businesses to set up shop.

Singapore is another country that is seen as a potential beneficiary of the US crackdown. The city-state has a pro-business government and a well-developed financial sector. Singapore has also been relatively open to cryptocurrency businesses, and it has even launched its own cryptocurrency, the Singapore dollar digital token (SGD D).

Switzerland is a third country that could benefit from the US crackdown. The country is known for its banking secrecy laws and its low taxes. This makes Switzerland an attractive place for cryptocurrency businesses to store their assets and to do business.

In addition to Hong Kong, Singapore, and Switzerland, there are a number of other countries where cryptocurrency could flourish. These include:

  • Argentina: The Argentine peso has been in a state of decline for years, and many Argentines are looking for ways to protect their savings from inflation. Cryptocurrency could be an attractive option for these Argentines.
  • Brazil: Brazil has a large and growing population, and the country is becoming increasingly connected to the internet. This could make Brazil a fertile ground for cryptocurrency adoption.
  • Nigeria: Nigeria has a large and young population, and the country has a growing economy. This could make Nigeria a potential market for cryptocurrency even as though they have recently banned the likes of Binance from the country.
  • Turkey: Turkey has been experiencing high inflation in recent years, and the Turkish lira has lost a significant amount of value. This has led to an increase in the use of cryptocurrency in Turkey.

The recent crackdown on cryptocurrency by the US government could be damaging to innovation in this space from US based companies, this could very well lead to the USA falling behind in this emerging technology.

As a last reference of the utility and embracing of cryptocurrency comes as Turkish citizens flow into the stable coin Tether due to their own currency uncertainty. Tether is a cryptocurrency that is pegged to the US dollar, which makes it a more stable option for Turkish citizens who are looking to protect their savings from inflation.

The Turkish lira has lost over 40% of its value against the US dollar in the past year. This has led to a surge in inflation, which has made it difficult for Turkish citizens to make ends meet. As a result, many Turkish citizens have turned to cryptocurrency as a way to protect their savings and to make payments.

The flow of Turkish citizens into Tether is a sign that cryptocurrency is becoming increasingly popular as a way to protect savings and to make payments. As more and more people around the world become disillusioned with traditional financial systems, cryptocurrency is likely to become even more popular.

Tether is the most popular stable coin in the world, and it has a market capitalization of over $80 billion. The coin is backed by a reserve of assets, which includes US dollars, euros, and gold. This makes Tether a more secure option than other cryptocurrencies, which are not backed by any assets.

Tether has added more Bitcoin to its reserves and according to the company will continue to do so. Tether announced recently that it had added 100,000 Bitcoin to its reserves, bringing its total holdings to over 400,000 Bitcoin.

The addition of Bitcoin to Tether’s reserves is a sign that the company is confident in the future of Bitcoin.  Tether is also making a bold move into Bitcoin mining, this is a further sign that the company is confident in the future of Bitcoin. This move into Bitcoin mining could help to increase the security of the Bitcoin network as well. The more people mining Bitcoin, the more secure the network becomes.

What may also be a viable addition, due to it’s low energy and computer power requirements, is the mining of PECU coins. Pecu Novus is a decentralized blockchain network with it’s native coin being PECU, it uses Proof of Time “PoT” as opposed to Proof of Work “PoW” as it’s consensus mechanism, making it an attractive alternative revenue generation model for any Bitcoin mining company, including Tether.

Their move into mining can easily make an impact on the potential mass adoption of cryptocurrency globally. Tether’s business is growing rapidly year on year. The company’s market capitalization has increased by over 500% in the past year. This growth is being driven by the increasing adoption of cryptocurrency. As more and more people around the world become disillusioned with traditional financial systems, cryptocurrency is likely to become even more popular.

Tether’s growth prospects are global and vast. The company is already available in over 200 countries and territories. As the adoption of cryptocurrency continues to grow, Tether is well-positioned to capitalize on this growth. Their integration into viable decentralized cryptocurrency exchanges will add to the value of the company as a whole and put Tether in position to be a major player in the cryptocurrency industry.

James Cullen
Technology/Digital Assets Desk

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