Hong Kong ETF issuer says China is preparing a shift into Bitcoin and crypto

Hong Kong exchange-traded fund (ETF) issuer Hashkey Capital CEO Chao Deng says the Asian country is looking into Web 3 and crypto and might reconsider its stance on digital currencies. Although crypto is banned in China, the government greenlit the use of blockchain technology. 

In a recent interview with CNBC, Deng said that Hong Kong is a gateway to the Chinese mainland, often serving as a testing ground for the country’s new financial and technological innovations. 

“Hong Kong is always used as the lab for experiments, either in economies or new industries or sectors,” Deng said. He noted that discussions with regulators have revealed there’s an effort to utilize the “one country, two systems” framework to explore crypto and Web3 applications.

Donald Trump’s election victory changed China’s perspective on crypto

China was once the world’s epicentre of crypto trading and mining, with yuan-based transactions accounting for 80% of global Bitcoin volume before a regulatory crackdown began in 2013. 

However, four years later, authorities completely tightened restrictions, banning domestic cryptocurrency exchanges, initial coin offerings (ICOs), and events promoting digital assets.

After Donald Trump won the November 2024 US presidential elections, Deng said that China shifted its stance from  “hostile” to supportive. 

“With Trump and the new administration’s support, the regulatory framework will be more clear. So now the institutions, endowments, financial institutions, and high net worth individuals feel comfortable getting into the Web3 and crypto space in a more regulated and compliant way,” the CEO reckoned.

China’s central bank does not recognize cryptocurrency as a legal tender, regulators have not passed formal legislation outlawing it entirely. 

The 2013 government circular on Bitcoin had classified it as a “virtual commodity” rather than a currency, allowing citizens to trade at their own risk.

“Regulation takes a longer time than the industry expects. It’s always the case in all new nascent industries. This also is already a very important message to the industry. The US regulator will be followed by other regulators, same as in Europe, in Asia, here in Singapore and Hong Kong,” Deng added.

Chinese financial regulators’ mind is changing

According to Yifan He, CEO of Red Date Technology, some conversations with financial regulators insinuate that a change of heart might be coming soon. 

“I see some signal from financial regulators,” He said. “They’re beginning to talk about Bitcoin, saying we need to pay more attention and do more research on digital assets.”

Two years ago, He believed China had “zero chance” of lifting its crypto restrictions. Now, he estimates there is “more than a 50% chance in three years.” 

Decentralized betting marketplace Polymarket placed the odds of China unbanning Bitcoin by the end of March at a 0% chance, a fall from 21% in December 2024, when the crypto was trading for over $97,000.

Deng told CNBC that a successful implementation of digital asset regulations in Hong Kong could influence the mainland’s stance. “If it’s successful, I think there is the possibility the mainland China government will reconsider their stance towards the crypto and Web3 industry,” he said.

HashKey Capital expands regulated offerings

In other news, on March 19, HashKey Capital secured a Type 1 license from the Hong Kong Securities and Futures Commission (SFC) to provide crypto-backed brokerage services for retail and professional investors. 

The firm already holds a Type 9 license for asset management and a Type 4 license for securities and virtual asset investment advisory services. Recently, it also received approval to provide discretionary account management for virtual assets under its existing license.

“The Type 1 license enhances our capabilities and provides significant value to investors,” said Vivien Wong, Partner at Liquid Funds. “It enables us to offer a broader range of investment opportunities, catering to different risk preferences with a strong focus on risk management and long-term growth.”

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