• Reports suggest that China has been secretly backing Hong Kong’s ambitions to become the crypto hub of Asia.
• Officials from mainland China have been visiting Hong Kong to watch the developments in the region’s crypto landscape.

Bitcoin and the broader cryptocurrency market delivered a strong comeback last week adding over $2100 billion to investors’ wealth. As of press time, Bitcoin is trading at $24,645 with a market cap of $475 billion. For now, $25,000 remains the crucial level of resistance for the BTC and it is important to surge past this level to continue the upward momentum.

The recent developments suggest that China is getting back into the crypto game, however, through the Hong Kong route. Earlier this week, reports came that Hong Kong is planning to allow retail traders to trade larger crypto coins such as Bitcoin and Ethereum.

In its consultation paper on Monday, February 20, the Securities and Futures Commission (SFC) spoke about this development of retail trader participation. It also noted that they have provided safeguards such as knowledge tests, and risk profiles. Besides, they have also kept reasonable limits on exposure. If true, this would mean a massive influx of liquidity in the crypto space.

Another report shows that Beijing is providing under-the-radar backing to Hong Kong’s crypto ambitions. Sources familiar with the matter stated that representatives from China’s Liaison Office have been frequent guests at Hong Kong’s crypto gatherings over the last few months.

The officials from mainland China have been checking on developments, have been asking for reports, as well as making follow-up calls. Local crypto operators also stated that the presence of officials from mainland China is clearing up doubts over Beijing’s attitude towards Hong Kong’s crypto ambitions.

Using Hong Kong As A Testing Ground

While China continues to maintain a strict crypto ban in the mainland, it seems to be using Hong Kong as the testing ground to once again get into crypto. Businesses from the Chinese mainland and overseas jurisdictions are planning a return to Hong Kong. Speaking to Bloomberg, Nick Chan, a National People’s Congress member and a lawyer who advises on cyber-security and digital assets said:

“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’”.

However, it would be too early to say that Beijing could be relaxing its crypto rules anytime soon. But Hong Kong’s renewed interest in crypto has surprised many and comes at a time when regulators are tightening their grip over the crypto market in popular markets such as the United States and Singapore.

Crypto exchange Huobi Global is now seeking a license to offer crypto trading services in Hong Kong. It also plans to set up a local exchange in Huobi Hong Kong to serve institutional investors from the region. during his interview last month, Huobi CEO Justin sun said:

“The changing attitude of the Hong Kong SAR government towards crypto signals a nod from the Chinese central government granting pilot status to HK for some forward-looking experiments on how can crypto be best adopted and localized for the huge Chinese market at large. I’m very bullish on the outlook for crypto in the greater China region for the next decade.”