Since the early days of cryptocurrency, Hong Kong has been known as an area that welcomes new and innovative technology. This tradition continues today with the city being home to several crypto startups. However, this hasn’t always been the case. In 2021, China announced a ban on all cryptocurrency-related activities within its borders, effectively ending Hong Kong’s crypto boom. However, since then Hong Kong has begun to adopt a more welcoming attitude towards these businesses once again. With clearer regulations in place and increasing financial inclusion among youth here in Hong Kong, it is safe to say that this relationship between crypto and the City of Lights is destined to continue indefinitely.
Given the importance of the cryptocurrency industry to Hong Kong’s economy, it is likely that regulators will take a lenient approach to digital asset trading. This could lead to increased investment in the sector and increased adoption of cryptocurrencies worldwide.
Given the city’s recent efforts to embrace virtual asset businesses and its strict regulations, it is no surprise that so many companies are interested in establishing a presence in Hong Kong. KuCoin, one of the world’s largest crypto exchanges, has already said last year that it would open an office in the city. The department for foreign direct investment has received “expressions of interest” from over 80 virtual asset-related companies from both mainland China and abroad. This indicates just how dominant this sector is becoming, and signals to other cities that innovation and entrepreneurship can be successful if they adopt a similar mindset.
As some early adopters of the semi-autonomous region laud the development, others question whether or not the conditions are currently in place for building an ecosystem of web3 organizations and businesses. While crypto-trading related firms may be the first to reap the benefits of this policy change, it remains to be seen if other types of business will follow suit.
Too big to miss
Under the “one country, two systems” policy, Beijing granted Hong Kong a high degree of autonomy in the legal, economic and social realms. This resulted in multinationals setting up shop in the city as their gateway to China. Export-oriented Chinese firms began using Hong Kong as a logistics and clearing center, greatly benefiting from its proximity to mainland China.
Hong Kong has been a springboard connecting China and the outside world for many years, but in recent years its allure has diminished as political fallout and stringent COVID controls have made it increasingly difficult to travel here. While the city is still an important part of China’s economy and culture, it may not be as viable a connection hub in the future.