A Tale of Two Chinas: Crypto Strategy, Ban or Build

In August 2025, China and Hong Kong stand on opposite sides of the cryptocurrency policy spectrum. Yet their strategies intersect in shaping the global digital asset market.

Mainland China maintains an uncompromising ban on cryptocurrency trading and mining. Meanwhile, Hong Kong advances as a regulated hub for digital assets, tokenization, and Web3 infrastructure.

Mainland China: Prohibition, Enforcement, and the e-CNY Priority

Mainland authorities have fully enforced their 2017 prohibition on cryptocurrency trading and the 2021 blanket ban on mining. In June, the People’s Bank of China (PBoC) emphasized that financial stability and capital controls remain top priorities.

“The rapid expansion of cryptocurrencies and stablecoins presents significant regulatory challenges.”

Enforcement has intensified. In July 2025, police and regulators conducted coordinated crackdowns on schemes using Tether (USDT) for illicit cross-border transfers. This was part of a broader effort to curb yuan depreciation pressures and capital outflows. OTC brokers and telecom fraud groups have been frequent targets.

Chinese companies are prohibited from legally holding cryptocurrencies on their balance sheets. Exposure, if any, comes indirectly through offshore subsidiaries or Hong Kong-listed products. Even discussion of a yuan-pegged stablecoin remains at the research stage. State economists suggest pilots in Shanghai or Hong Kong. However, they acknowledge that strict capital controls make near-term implementation unlikely.

The state’s digital currency,the e-CNY, remains the centerpiece of its digital finance policy. Piloted since 2019, the central bank digital currency has been tested in dozens of cities. It was also tested at high-profile events, such as the Beijing Winter Olympics. Beijing positions e-CNY as a cashless alternative to private cryptocurrencies, linking its adoption to reduced crypto market influence.

Hong Kong: Regulated Openness and Market Building

While the mainland restricts, Hong Kong has embraced a “regulated acceptance” model underpinned by transparency and investor protection.

ETF and Exchange Licensing

In April 2024, Hong Kong Exchange became the first in Asia to list spot Bitcoin and Ethereum ETFs. The products were offered by ChinaAMC, Harvest, and Bosera. The products use in-kind creation and redemption, allowing investors to contribute or receive crypto directly. This feature facilitates arbitrage and improves price alignment. Initial turnover was modest at HK$112 million, or $14.3 million, far below US debut volumes. However, regulators called it a “milestone.”

With strict suitability checks and risk disclosures, regulators permit retail access to licensed exchanges such as HashKey and OSL for high-market-cap tokens only.

Stablecoin Licensing Regime

On August 1, 2025, Hong Kong’s Stablecoins Ordinance took effect, establishing one of the world’s first comprehensive licensing systems for fiat-pegged stablecoin issuers. Requirements include 100% high-quality reserve assets, robust redemption mechanisms, and governance standards. Algorithmic stablecoins are excluded. Applications are already underway, with first approvals expected before year-end.

New August 2025 Developments: Tokenization and Infrastructure

Hong Kong advanced its leadership in tokenization on August 7, launching the world’s first registry platform for real-world asset (RWA) tokenization at HKEX Connect Hall. The platform standardizes encoding, categorization, and valuation to address fragmented regulations and boost transparency and liquidity.

A joint report by the Hong Kong Web3.0 Standardization Association and Hong Kong Polytechnic University identified three prerequisites for scaling RWA: standardized data and valuation models, legal and technical interoperability, and reliable governance and auditing. The report cautions against assuming tokenization applies universally across asset classes.

Christopher Hui, Secretary for the Hong Kong Government’s Financial Services and the Treasury, emphasized a comprehensive regulatory approach covering exchanges, stablecoin issuers, and custody providers.

“In addition to tokenized government bonds, Hong Kong will explore tokenizing precious metals, base metals, and renewable energy assets.”

Alongside the RWA registry, the government launched a two-month public consultation on regulating over-the-counter (OTC) virtual asset trading and custody services to close remaining regulatory gaps by year-end.

Private-Sector Innovation

Recent months have brought notable private-sector initiatives aligned with Hong Kong’s regulatory framework:

• HSBC introduced the city’s first bank-led blockchain settlement service in May, enabling real-time payments and tokenized deposits for trade finance.
• China Asset Management (Hong Kong) launched Asia-Pacific’s first retail tokenized money market fund in February. The fund gives investors blockchain-based access to HKD-denominated short-term deposits and high-grade money market instruments.

These developments complement earlier milestones like HSBC’s retail tokenized gold product and Hong Kong’s tokenized green bonds.

Corporate Treasury Strategies: Divergence Continues

A few listed companies in Hong Kong are adding crypto to their corporate strategies. Boyaa Interactive has shareholder approval to acquire up to $100 million in Bitcoin and Ethereum. By contrast, Meitu, which bought BTC and ETH in 2021, has sold all holdings after impairments, exiting its crypto treasury strategy.

On the mainland, no listed company can hold Bitcoin as a treasury asset, underscoring the policy divide.

International Market Impact

US spot Bitcoin ETFs remain the primary driver of price action globally, with cumulative inflows of around $12 billion contributing to Bitcoin’s record highs above $118,000 in July 2025. Hong Kong’s ETF market is small by comparison but adds an Asia-time-zone venue for price discovery and arbitrage, particularly through in-kind mechanisms linking onshore and offshore liquidity.

Hong Kong officials acknowledge that southbound Stock Connect channels exclude crypto ETFs, limiting direct mainland investor flows. However, they see potential to grow to 20% of the US market size by attracting regional capital within a year.

Competing Regulatory Models

Hong Kong’s “regulated openness” model — balancing innovation with investor protection — is gaining attention as a potential template for other financial centers, including Singapore and Dubai. Its clarity contrasts with the mainland’s “ban plus e-CNY” approach, which focuses on controlling capital and nurturing state-managed digital finance.

Leung Chun-ying, vice chairman of the Chinese People’s Political Consultative Conference, stated, “The development of Web3 and the digital economy has entered a phase of historic opportunities, although tempered by various institutional and technical challenges.”

Jonathan Choi, chairman of the Chinese General Chamber of Commerce, added, “Hong Kong’s licensing regime for virtual asset platforms, launched in 2023, has been adopted by several Southeast Asian countries.”

Outlook

In the near term, the dual structure — a prohibitive mainland and a permissive but regulated Hong Kong — is set to continue. For Hong Kong, the following milestones include issuing the first stablecoin licenses, expanding RWA products into secondary markets, and integrating e-HKD pilots with tokenized deposits and securities.

E-CNY deployment and enforcement against unauthorized crypto activity remain priorities for the mainland. Any easing of restrictions, such as a yuan-backed stablecoin pilot, would mark a significant shift with global repercussions.

As the US remains the primary crypto price driver, Hong Kong’s integration of tokenization, ETFs, and stablecoins positions it as Asia’s complementary hub. Whether this evolves into deeper cooperation or sharper competition with US-led markets will depend on execution and on how far China allows Hong Kong’s crypto experiment to run.