Is China Getting Back to Crypto One Way or Another?

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Suppose current indicators are anything to go by. In that case, China may be in for another much-anticipated massive appearance on the global crypto market in the coming months through its most popular special administrative region, Hong Kong.

Despite the totalitarian ban on crypto in mainland China, Hong Kong’s autonomy has enabled it to carve out its own rules, including venturing into three successful cryptocurrency-based ETFs over the last twelve months. Lawmakers in Hong Kong parliament had, in December, laid the groundwork for an expansive crypto investment, with the passage of the virtual assets service providers (VASP) bill set to take effect in June.

The bill subjects all current and future VASPs to rigorous investor protection standards and anti-money laundering checks consistent with traditional finance. Once live, Hong Kong will begin to issue permits for all forms of crypto trending and exchange activities subject to its guidelines.

Recently speaking at the Hong Kong Web3 Innovators summit, the state’s financial secretary, Paul Cheng, disclosed that the country is currently entering the pilot stage for its CBDC project and has already “completed the legislative framework to set up a licensing system for virtual asset service providers….consistent with the requirements currently applicable to traditional financial institutions.” Paul added he believes the system will “provide a certain degree of market recognition for virtual asset exchanges”, opening the way for “banks to cooperate with licensed virtual asset exchanges when providing trading services to their clients.”

Hong Kong and Dubai have been hailed as two of the most progressive crypto-friendly countries outside Europe. 

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China’s Blockchain Goals

China is also bent on exploring other ways to bring significant value to the industry without exposing itself to the risks. One such way is the recent establishment of a blockchain research facility. The Chinese Miniter of Science and Technology recently approved establishing a blockchain research facility in the heart of Beijing to focus on developing hardware and software components and their applicability to future social, economic, political, and environmental advancement.

The move comes barely two years after Chinese Prime Minister Xi Jinping lauded Blockchain as an “important role [player] in the next round of technological innovation and industrial transformation.” China already leads the world in the highest number of blockchain patents and is looking to become a significant exporter of technology over the next decade.

Hong Kong’s development strides have been hailed as a positive step helpful for the development of crypto, which stands in contrast to the US, where regulatory clampdown has shrouded the cryptocurrency sector with a cloud of doubt, fear and uncertainty.