China Reconsiders Crypto Policy Through Hong Kong’s Web3 Sandbox
China could be inching toward reversing its longstanding crypto ban, according to Chao Deng, CEO of HashKey Capital, a Hong Kong-based ETF issuer. In an interview with CNBC, Deng said that Hong Kong is being used as a testbed for potential policy changes under China’s “one country, two systems” framework.
“Hong Kong is always used as the lab for experiments, either in economies or new industries or sectors,” Deng noted.
While cryptocurrency remains banned in mainland China, blockchain technology has been officially endorsed. Now, as Hong Kong pushes forward with Web3-friendly regulation, signs suggest that Beijing is watching closely.
Trump's Election Seen as a Turning Point
Deng pointed to a shift in sentiment following Donald Trump’s 2024 election win, suggesting that China’s stance toward crypto moved from “hostile” to open-minded.
“With Trump and the new administration’s support... institutions and high net worth individuals feel more comfortable entering the space in a regulated way,” Deng said.
Historically, China was once the epicenter of crypto trading and mining, with yuan-based transactions accounting for 80% of global Bitcoin volume before regulatory crackdowns began in 2013.
Although China’s central bank doesn’t recognize crypto as legal tender, Deng highlighted that no law explicitly bans cryptocurrency; it remains a “virtual commodity” that citizens can trade at their own risk.
Signals from Chinese Regulators
Yifan He, CEO of Red Date Technology, also noted a growing interest from Chinese regulators in digital assets.
“They’re beginning to talk about Bitcoin... saying we need to pay more attention and do more research,” he told CNBC.
He admitted that two years ago, he believed China had “zero chance” of reversing its crypto restrictions. Now, he estimates a greater than 50% chance within the next three years.
However, sentiment on decentralized prediction markets like Polymarket remains skeptical—placing the chance of a policy reversal by the end of March at 0%, down from 21% in December 2024, when Bitcoin was trading near $97,000.
Hong Kong’s Progress Could Influence Beijing
Deng believes that successful crypto regulation in Hong Kong could act as a blueprint for mainland policy.
“If it’s successful, I think there is the possibility the mainland China government will reconsider their stance,” he said.
This aligns with previous patterns, where Hong Kong served as a launchpad for financial and tech reforms later adopted more broadly in China.
HashKey Expands Regulated Crypto Services
On March 19, HashKey Capital secured a Type 1 license from the Hong Kong Securities and Futures Commission (SFC) to offer crypto brokerage services to both retail and professional investors.
- Type 1: Dealing in securities (including crypto-backed services)
- Type 4: Advisory services on virtual assets
- Type 9: Asset management
- Approval for discretionary crypto account management
“The Type 1 license enhances our capabilities and provides significant value to investors,” said Vivien Wong, Partner at Liquid Funds.
Wong emphasized that the firm will focus on risk-managed, long-term investment strategies tailored to diverse investor needs.
