Key facts:
Hong Kong accounts for East Asia’s largest year-over-year growth in cryptocurrency usage.
Chinese people are using cryptocurrencies to preserve their wealth, the company says.
Hong Kong has emerged as an epicenter of bitcoin (BTC) and cryptocurrency adoption in the Greater China region, according to a recent report from blockchain analytics firm Chainalysis.
In his reportThe company highlights that, despite not being an independent country, Hong Kong, as a Special Administrative Region of China, enjoys a different legal and regulatory framework which allows for greater flexibility in financial innovation.
This unique status has allowed Hong Kong fostering a more welcoming environment for cryptocurrenciesin contrast to the strict regulation imposed by the Chinese central government.
Due to its more liberal policy towards cryptocurrencies, Hong Kong has not only attracted domestic investors, but also has served as an example for mainland Chinaaccording to Chainalysis.
The city has recorded the largest year-on-year growth in cryptocurrency usage in East Asia, with an 85.6% increase in activity linked to cryptoassetspositioning itself in the position 30 in the world in the Global Cryptocurrency Adoption Index.
In addition, the region has shown particular interest in how cryptocurrencies can be used to transfer assets out of China or to preserve wealth in times of uncertainty.
Hong Kong’s influence on China’s cryptocurrency landscape could be an indication of a shift in Chinese policy towards cryptocurrencies. As Hong Kong continues to foster an environment of innovation and adoption, Chainalysis suggests it could be exerting indirect pressure on China to reconsider its approach to crypto assets, potentially opening the door to a more open policy in the future
A tumultuous relationship
Since 2021, China has had a tumultuous relationship with cryptocurrencies. Formerly a hub for Bitcoin mining and cryptocurrency trading, its government has however imposed increasingly severe restrictions, citing concerns over financial stability, fraud and capital flight.
However, this policy has led to increasing adoption of cryptocurrencies by Chinese citizens, not only as a form of investment, but also as a means of preserving wealth in the face of economic and political uncertainty, Chainalysis insists.
Ben Charoenwong, associate professor of finance at INSEAD’s Asia Campus, told Chainalysis that cryptocurrencies “are a way to preserve wealth when things are uncertain and also help mitigate the effects of authoritarianism in China. It’s a question of property rights.”
Following the ban on access to major cryptocurrency exchanges in 2021, Chinese users have turned to over-the-counter (OTC) platforms and P2P trading networks.
According to Chainalysis, these platforms have shown significant growthespecially since mid-2023, adapting to the regulatory environment and capitalizing on the enduring interest in cryptocurrencies among Chinese investors.
This article was created using artificial intelligence and edited by a human on the editorial staff.
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