China's Crypto Stance: Mainland Remains Firm on Ban While Hong Kong Explores Licensed Future
In its latest annual financial stability report, the People's Bank of China (PBOC) reaffirmed its strict stance against cryptocurrency trading while acknowledging Hong Kong's divergent path towards regulated adoption. The 2024 report, released on Friday, highlights the ongoing regulatory disparities between mainland China and Hong Kong in the rapidly evolving world of digital assets.
Since September 2021, mainland China has enforced a comprehensive ban on all crypto trading and mining activities. The PBOC's recent report underscores that this position remains unchanged. Globally, the report notes, 51 jurisdictions have implemented bans or restrictions on cryptocurrency assets, with some nations adjusting existing laws or creating new ones to address the burgeoning sector.
Hong Kong, however, has charted a different course. In June 2023, it officially launched a licensing regime for crypto trading platforms, opening the door for these platforms to offer retail trading services. This move positions Hong Kong as a potential hub for regulated crypto activity in Asia.
The PBOC's report also reveals that Hong Kong is taking steps to integrate cryptocurrency transactions into the established financial system. Major financial institutions operating in Hong Kong, such as HSBC and Standard Chartered Bank, are now required to include such transactions in their routine customer supervision processes.
Beyond its domestic policies, the Chinese central bank indicated its commitment to collaborating on an international regulatory framework for crypto assets, aligning with suggestions from the Financial Stability Board. While acknowledging that the current interconnectedness between crypto activities and core financial markets may be limited, the PBOC expressed concerns about potential risks in economies where crypto use in payments and retail investments is expanding. "The connections between crypto activities and systemically important financial institutions, core financial markets, and market infrastructures may be limited. However, cryptocurrencies may pose risks in some economies as the application scenarios of cryptocurrencies in payments and retail investments increase,” the PBOC stated in the report.