Hong Kong could act as a ‘tailwind’ for late crypto activity in Asia: ScrgruppEn

Recent developments in the cryptocurrency space in Hong Kong could provide a “potential tailwind” to lift cryptocurrency activity in the East Asian region, which has mainly suffered from China-wide bans on trading activities since 2019.

The value of cryptocurrencies received in East Asia was only 8.8% of the world between July 2022 and June 2023, According to According to an October 2 report from Chainalysis, making it the fifth most active cryptocurrency market. However, Chainalysis said Hong Kong’s recent moves could help increase that number.

“A potential tailwind for East Asia comes from Hong Kong, where several cryptocurrency initiatives and industry-friendly regulations rolled out over the past year have fueled growing optimism.”

Data released by Chainalysis reveals that East Asia’s share of the value of cryptocurrency transactions rose from around 30% in 2019 to less than 10% by Q2 2022, following a number of cryptocurrency-related bans in China.

Share of cryptocurrency transaction value by region, with East Asia colored in yellow. Source: Chainalysis.

However, Chainalysis said there is “huge optimism” in Hong Kong, noting that despite its much smaller population, Hong Kong is already a “very active cryptocurrency market” in terms of raw transaction volume.

Between July 2022 and June 2023, the market received an estimated $64 billion worth of cryptocurrencies, compared to $86.4 billion in China, despite its population being only 0.5% the size of the mainland.

Commenting on Chainalogy, Merton Lam of CryptoHK, an over-the-counter digital asset trading hub in Hong Kong, said cryptocurrencies have become a staple in the investment portfolios of many banks, private equity firms and high-net-worth individuals. They work with her within the region.

In addition, Chinese state-owned enterprises have also launched cryptocurrency-focused investment funds recently.

However, Dave Chapman, of digital asset platform OSL Digital Securities, told Chainalogy that although digital assets are “not disappearing” in East Asia – it is still too early to say whether Hong Kong’s crypto ambitions will It means that China has fully embraced the cryptocurrency space.

“Promoting Hong Kong as a potential cryptocurrency hub does not necessarily indicate the Chinese government’s position on cryptocurrencies […] This can be seen as an exploratory approach to understanding digital assets without diluting mainland policies.”

Related: Hong Kong has maintained its top position in the cryptocurrency space for two years in a row

Speaking to Cointelegraph, Markus Thelen, head of research and strategy at Matrixport, said Hong Kong will serve as a “proving ground” for broader cryptocurrency adoption in China.

However, Hong Kong plays a big role in one area that other countries have not been able to tap into, says Thelen:

“Critically, there is a real interest in attracting the crypto asset management industry which has so far been a missing piece of the puzzle as most crypto companies tend to be categorized as service providers, rather than the end user of cryptocurrencies.”

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