China reportedly approves crypto usage in Hong Kong, details inside

• China is reportedly onboard with Hong Kong’s recent push to embrace crypto.
• Representatives from mainland China are closely following and reporting on the crypto developments in the island city.

The island of Hong Kong seems to have the veiled approval of mainland China for its recent move to attract crypto investors to establish itself as a crypto hub. Recent reports suggest that Beijing is onboard with the move, which has helped to encourage mainland Chinese firms to return to the city.

Chinese representatives closely following Hong Kong’s crypto development

According to a report by Bloomberg published on 21 February, representatives from China’s Liaison Office, along with other officials, have attended Hong Kong’s crypto gatherings in the past few months. The meetings have been friendly, with officials checking on developments, asking for reports, and in some cases, making follow-up calls. The Liaison Office happens to be the top mainland body in the island city.

Local crypto operators have said that the officials’ presence at these events has helped to clear up any doubts about Beijing’s attitude toward Hong Kong’s efforts to become a crypto hub. The subtle support also shows that Chinese officials are interested in using the city as a testing ground for digital assets while keeping a tight rein on such activity on the mainland.

People familiar with the matter revealed that mainland representatives in Hong Kong are reporting their findings back to their superiors in mainland China, although the purpose of these reports is not yet clear.

The Securities and Futures Commission (SFC) has initiated a consultation process to allow Virtual Asset Service Providers to apply for licenses to offer trading services for retail investors. The regulator has set requirements for VASPs seeking licenses, including a due diligence process on tokens prior to listing, a risk profile for clients to ensure their exposure is reasonable, and limits on allowable exposure.

It is unclear when the SFC’s consultation process on allowing retail investors access to crypto trading will be concluded. 

According to National People’s Congress member and crypto lawyer Nick Chan,

“As long as one doesn’t violate the bottom-line, to not threaten financial stability in China, Hong Kong is free to explore its own pursuit under ‘One Country, Two Systems’.”