Today we will talk about the current status of cryptocurrency compliance in Hong Kong.
Although Hong Kong is still thriving, Ju Zuo feels that it is the end of the road.
1. Hong Kong’s crypto policy is difficult to implement
In Juzuo's view, Hong Kong's layout in the crypto market is more like getting up early and arriving late.
In fact, as early as the end of 2022, the Hong Kong government had already considered the future direction of supervision. At this stage, the United States is still struggling with whether cryptocurrencies are securities - because their new SEC chairman has just taken office and is waving his levers around.
At least in this time window, Hong Kong is ahead of the United States.
But the subsequent process was very slow.
During this period, the domestic web3 overseas expansion trend was caught up.
Due to domestic policy and regulatory issues, many teams have sought overseas development, most of which have gone to Southeast Asia and Dubai.
The Hong Kong government’s policies were finally implemented only after these wealthy teams had settled down abroad.
I remember that many teams expressed this dilemma when communicating with Juzuo:
I finally found a way overseas, and now you say it’s okay in Hong Kong. What were you doing before?
Of course, some teams withdrew to Hong Kong or set up new offices in Hong Kong - after all, it is closer to Shenzhen and the mainland and has more geographical advantages.
However, given that the Hong Kong government talks more than it does and that supporting facilities are not yet complete, most of the results have not been very good.
Because Hong Kong is facing a bigger crisis at this moment.
Due to various complex reasons, a lot of capital has fled Hong Kong and gone to Singapore.
During these years, Hong Kong's population lost more than 200,000 people.
Maybe everyone thinks this number is not a big deal, it’s just 200,000 people.
But the point is that in a place like Hong Kong, the 200,000 people who can abandon their assets and run away can take away enough wealth to make Singapore the new Asian financial center.
After all, poverty and humbleness cannot be changed.
When I went to Hong Kong again last year, Hong Kong had become a stinky port. At that time, Hong Kong had another nickname: the ruins of the international financial center.
So after Hong Kong has siphoned off mainland people and money through its Quality Talent and Highly Proficient Schemes, it looked back to do this and found that it could no longer keep up.
From the time the plan was formulated in 2022 to the launch of the ETF at the end of April 2024, only six exchanges obtained the so-called compliance licenses.
Except for hashkey, most of them are unknown, and they are basically local Hong Kong exchanges and nepotism.
On the contrary, top exchanges like Binance and OKX have not obtained licenses.
Until the United States passed the Bitcoin ETF.
2. Hong Kong ETFs, a poor imitator
On January 11 of this year, the United States officially approved the Bitcoin ETF, marking a milestone in the global legalization of Bitcoin.
After that, the crypto market ushered in an unprecedented bull market, the price of Bitcoin quickly broke through its previous high, and the entire market liquidity was very abundant.
At this time, Hong Kong was anxious.
The anxious thing about Hong Kong is, as Ju Zuo said, it got up very early but arrived late.
So after witnessing the power of ETFs, Hong Kong also expedited the approval of ETFs and prepared for their launch in a very short period of time - it only took a dozen days from issuing the approval document to officially launching them.
But the performance of the ETFs on both sides is very different.
After the United States passed the ETF, it brought more than $50 billion in liquidity to the crypto market. Morgan's investment managers have been lobbying their clients to invest in Bitcoin, at least adding Bitcoin to the asset allocation of many Americans.
This one-stop marketing system not only brings them generous commissions, but also creates a huge pump for the market.
On the first day of Bitcoin ETF listing, trading volume exceeded US$4.6 billion.
In contrast, the trading volume of Hong Kong's ETF on the first day was only US$11.2 million.
To use the popular words now,
US ETFs – the big ones are coming.
Hong Kong ETF – the big medicine is coming.
So much so that the domestic legal community says that the emergence of Hong Kong ETFs has provided greater convenience for mainland uncles to dispose of crypto assets, and they will not even need to entrust a third party in the future.
3. Hong Kong has become a salty land for crypto finance
There are actually three factors that lead to such a huge gap.
On the one hand, the financial maturity of the United States and Hong Kong is different. Asset allocation in the United States is a very mature strategy, so investment bank managers will promote Bitcoin ETFs like promoting stocks.
Although Hong Kong is known as the financial center of Asia, in fact even the Hong Kong dollar can only be issued with the US dollar as the underlying asset.
Most of Hong Kong's financial industries are downstream and vassal of the US financial industry.
The two sides are completely not on the same order of magnitude.
On the other hand, the United States allows all citizens to participate, while Hong Kong can only be participated by companies, institutions and professional investors registered in Hong Kong, and the number of investors is more than an order of magnitude different.
Although mainland investors can also participate by setting up companies and institutions in Hong Kong, it is of little significance overall because the threshold is still too high.
The third aspect is that Hong Kong does not have complete autonomy and must seek permission from Beijing.
So in terms of speed, unless Beijing asks for speeding up, for example, the speed of this ETF is very fast, while the issuance of compliance licenses by exchanges was very slow before.
You can figure out what’s going on here yourself, I won’t say too much.
In fact, there is another point, which is that the Chinese philosophy of doing things is not to be the first in the world.
This is particularly evident in the financial sector:
I am the first one to do this. It would be fine if I do it well, but what if I mess it up?
It is better to follow in the footsteps of others and do what they do. It is better to be careful. As for whether we can regain the pricing power and become a digital asset financial center, we should believe in the wisdom of future generations.
So what do you think about the future prospects of Hong Kong's crypto market?
Maybe, but the prerequisite is that the land attributes must be changed.
After all, it is impossible to achieve a good harvest on saline-alkali land.