Investors turn to stocks to gain exposure despite China's crypto ban

Mainland investors in China are flooding into Hong Kong’s equity markets to sidestep Beijing’s crypto ban, using stocks as a backdoor into the digital space.

This demand, locked up since the 2021 trading prohibition, just blew the doors open last week after Guotai Junan International, a Hong Kong-listed brokerage backed by the mainland, received a license to operate a virtual asset trading business.

The license triggered a buying frenzy. On Wednesday, Guotai’s shares nearly tripled in price, putting it at the top of the Hong Kong Stock Exchange by total trading value. The next day, it stayed at number one, even overtaking Alibaba.

On Friday, it slipped to second place behind Xiaomi, which launched its electric car the night before. The data, published by Wind Information, shows a clear trend: mainland buyers are pouring money into Hong Kong stocks linked to crypto activity to get a taste of what they can’t legally hold at home.

Hong Kong’s crypto license pushes Guotai to the front

The opening for these investors came after Hong Kong passed a stablecoin bill in May, allowing financial companies to issue and manage crypto assets tied to fiat currencies. Since the mainland considers crypto trading illegal, this move gave Hong Kong-listed firms with licenses a significant edge.

Morgan Stanley’s Chief China Economist Robin Xing, in a June 19 note, explained why this matters. “We believe China’s newfound interest in stablecoins is driven by concerns that legislation of US stablecoins could extend dollar dominance,” Robin said. The note added that the People’s Bank of China (PBOC) is now looking at Hong Kong as a sandbox to test alternative payment tools.

Despite the crypto ban, PBOC Governor Pan Gongsheng spoke in mid-June about the importance of stablecoins and pointed to weaknesses in older payment systems that digital tech can potentially fix. That’s where the pivot becomes clear. Robin and his team took Pan’s remarks as a hint that change might be coming, though nothing official has been rolled out yet.

China Renaissance, TF Securities chase the same play

Other firms followed fast. On Thursday, China Renaissance said it would invest $100 million over two years into crypto and Web3 development. That same day, it also brought on Frank Fu, the former CEO of Huobi Americas, as an independent non-executive director. The company, also known as CR Holdings, saw its stock jump 20% last week.

Back on the mainland, where stocks face tighter trading restrictions, Shanghai-listed TF Securities confirmed that its subsidiary, TF International, had also secured a Hong Kong crypto trading license. That news sent TF shares up by 29% last week.

Even firms without clear crypto connections are getting swept into the wave. Eastmoney, a financial data and brokerage company, saw the highest trading turnover on mainland exchanges last week, both in share volume and price. It hasn’t said anything about virtual assets, but its stock still rose 11%.

Li Dongfang, a finance blogger based in Beijing, said the Guotai rally is being driven by first-mover excitement, not by hard fundamentals. “The stock price surge is due more to investors pursuing emerging themes and following first-mover advantage,” Li wrote in Chinese, as translated by CNBC. He added that other brokerages will likely get similar approvals, but their stocks might not swing as wildly.

The crackdown on crypto was always about managing financial risk. A population of 1.4 billion doesn’t leave a lot of room for unchecked speculation. But even without formal approval, the interest hasn’t slowed down. It just found a new path.

This year, Consensus, the massive crypto conference based in New York, held its first event in Hong Kong back in February. It plans another for 2025. The growing number of crypto-related conferences in the region shows how much attention Hong Kong is drawing as a crypto gateway.

The expansion of stablecoins in cross-border trade is another trend being watched. Recent Chinese business reports noted that a unit of JD.com, together with Standard Chartered, is now officially part of Hong Kong’s stablecoin pilot. The goal is to see how these tokens could support exports and online sales—without touching traditional banks.

KEY Difference Wire helps crypto brands break through and dominate headlines fast