Hong Kong could be the next crypto hub

Hong Kong has A recurring relationship with crypto: Before China banned all crypto-related activity in 2021, the Asian financial hub was the first home of several crypto startups, including defunct FTX, which left for the Bahamas after the ban. Now, Hong Kong welcomes crypto businesses again, but this time with more regulatory clarity.

During its government-backed fintech week late last year, Hong Kong signaled its intention to legalize crypto retail and introduce a licensing regime for digital asset providers. The plan took shape in February when the city released draft rules that would allow individual investors to trade some major cryptocurrencies starting June 1.

Companies are already reacting to the change in attitude of the city. As of February, the foreign direct investment department had received “expressions of interest” from more than 80 virtual asset-related companies from mainland China and overseas to establish a presence in Hong Kong. KuCoin, one of the largest crypto exchanges in the world, already announced last year that it would open an office in the city.

While these developments are encouraging signs for some, others wonder if the semi-autonomous region has the right conditions for all forms of Web3 organizations and businesses to thrive. The first consensus is that crypto-trading related businesses are likely to be the first to reap the rewards of the policy change.

Too big to miss

When Hong Kong was returned to China in 1997, Beijing established a “one country, two systems” regime that granted the city a high level of autonomy in legal, economic and social matters. Export-oriented Chinese companies have begun to use the city as a logistics and clearinghouse, and multinationals have set up stores there as a gateway to China.

In recent years, however, Hong Kong has increasingly lost its appeal as a springboard connecting China and the outside world after episodes of political fallout and strict COVID controls.