Emily Walker
The significance of cryptocurrency regulation by the People’s Bank of China (PBOC) is highlighted in its recently released 2024 Financial Stability Report.
This emphasis becomes particularly relevant when considering the differing attitudes towards crypto in mainland China compared to Hong Kong. While mainland China enforces a strict prohibition on cryptocurrency trading and mining, Hong Kong is taking steps to develop its own system for crypto licensing.
Key Insights from the 2024 Financial Stability Report
The PBOC’s report stressed the increasing global emphasis on cryptocurrency regulations, revealing that 51 jurisdictions around the world have either fully banned or heavily restricted cryptocurrency activities.
Additionally, some countries are refining their regulatory approaches to better manage the new challenges that the industry presents.
This comes in the wake of the PBOC’s 2021 ban on digital currency trading and mining, a ban firmly upheld in mainland China.
Contrarily, Hong Kong, operating under a different regulatory framework, has implemented measures that permit licensed exchanges to engage in crypto trading with retail investors, indicating a more progressive attitude towards the sector.
This strategy is aimed at establishing Hong Kong as a prominent regional crypto center, attracting international businesses in search of clear regulations and improved investor trust.
The report further noted that major financial institutions in Hong Kong, such as HSBC and Standard Chartered Bank, are required to integrate cryptocurrency transactions into their customer oversight systems.
This practice aligns with global standards to ensure that financial institutions are proactive in managing the potential risks linked to digital asset transactions.
Through these initiatives, Hong Kong appears to be striving for a balance between fostering innovation and imposing stringent regulatory measures, potentially serving as a model for other financial hubs considering digital currency integration.
Hong Kong’s Progress Towards Becoming a Crypto Hub
In relation to Hong Kong’s ambitions for a cryptocurrency sector, there has been a significant recent development.
During an interview with the pro-Beijing newspaper Wen Wei Po, Wu Jiezhuang, a notable entrepreneur and member of both the Hong Kong Legislative Council and the National Committee of the Chinese People’s Political Consultative Conference, suggested that Bitcoin should be included in Hong Kong’s fiscal reserves.
Wu argued that adding Bitcoin to the region’s financial assets could diversify its portfolio and establish Hong Kong as a leader in the adoption of digital currencies.
In reply, the Treasury Bureau of the Special Administrative Region (SAR) Government pointed out that Hong Kong’s foreign exchange fund already embraces a globally diversified investment strategy to reduce risks and achieve consistent long-term gains.
While digital currencies are not explicitly cited as a major investment focus for the fund, the Bureau indicated that external managers responsible for these assets have the freedom to investigate various global asset classes. This effectively allows for some limited investment in digital currencies within the current investment strategy.
Image by DALL-E, Chart from TradingView