On February 19, co-founder of the Gemini crypto exchange, Cameron Winklevoss, stated that the next crypto bull run would begin in Asia. His statements come on the back of several regulatory rulings against crypto firms in the US.
For instance, on February 9, the SEC cracked the whip on crypto staking-as-a-service, forcing Kraken, the third-largest crypto exchange in the world, to shutter its staking platform and cough up a fine of $30 million. A few days later, on February 14, the SEC and the New York State Department of Financial Services (NYDFS) came down on stablecoins, ordering crypto firm Paxos to stop minting its Binance USD (BUSD) coin.
On the other hand, several countries in Asia are embracing cryptocurrencies and blockchain technology. Hong Kong, in particular, seems extremely bullish towards the digital asset industry. While financial watchdogs in the US continued to rein-in the crypto industry, authorities in Hong Kong have opened the doors to retail crypto trading. This proposal is part of several policy changes being put together that would position Hong Kong as a financial hub for digital assets. The government has also invited industry insiders and crypto experts to weigh in on the new policies until March 31.
This is in stark contrast to China, which banned crypto transactions in September 2021. This forced the country’s large web3 and crypto cohort to move to other countries like Dubai and Singapore. However, many companies still employ developers from the mainland thanks to its vast pool of tech talent. And, with Hong Kong warming up to the digital asset industry, several crypto companies could shift base closer to home.
Popular crypto exchange, Huobi, has already announced its intentions to commence operations in Hong Kong. In a recent interview, Justin Sun, an advisor to the exchange, announced that Huobi had applied for a license to offer crypto trading services in the Chinese territory. Sun also stated that the firm’s Asia headquarters would be moved from Singapore to Hong Kong.
“Huobi is stoked about Hong Kong's pro-crypto policies & we're working hard to secure our crypto license there. We aim to be one of the first fully compliant exchanges in HK & collaborate with our Asia-Pacific users to drive digital asset growth,” said Huobi in a February 20 tweet.
In a blog post from October 2022, former CEO of crypto derivatives giant BitMEX, Arthur Hayes, also predicted that the next bull run would start in Asia, more specifically, when China moves back into the market. However, he also stated that Hong Kong would play a vital role in China’s crypto resurgence.
Hayes explained that Hong Kong would serve as a litmus test for Beijing’s crypto endeavours and would act as a hub, channelling Chinese capital into global markets. “Beijing allows Hong Kong to exist in this way because it is beneficial for it to have controlled openness. As we all know by now, Hong Kong is part of China. Hong Kong has no real economy other than being a portal to China, with some softness around the edges,” Hayes said in his blog.
Adding to this narrative, a Bloomberg article states that Beijing will quietly support Hong Kong’s crypto efforts. According to this article, Chinese officials have frequented crypto gatherings in Hong Kong. Many are seeing this as Beijing’s silent endorsement of HK’s push to become a crypto hub. It also reinforces the notion that China sees its laissez-faire city as a testing ground for open crypto markets. This is similar to how Hong Kong served as China’s first test of open markets in the 20th century.
Hong Kong’s Financial Secretary Paul Chan also unveiled the city’s 2023 Budget yesterday, Feb 22. In his speech, Chan highlighted the importance of web3 and the opportunities it could provide. “The third generation Internet (Web3), currently in its start-up period, has the same huge potential. We must keep up with the times and seize this golden opportunity to spearhead innovation development,” he said. In the same speech, Chan also allocated 50 million Hong Kong dollars, which is around $6.37 million, for the development of a Web3 hub at Hong Kong’s creative digital community Cyberport.
In a study published by Forex Suggest, Hong Kong was also declared as the “best-prepared country” for crypto adoption in July 2022. The study takes into consideration factors like crypto ATM installations, pro-crypto regulations and startup culture. And now, with government backing, enthusiasm from crypto firms and the possible support of Beijing, Hong Kong is truly on track to becoming a global crypto hub.
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