Chainalysis, a blockchain analytics firm, suggests that recent developments in Hong Kong's crypto landscape could serve as a "potential tailwind" to revive crypto activity in East Asia. The region, which witnessed a decline in crypto activity after China's crypto bans in 2019, could benefit from optimism in Hong Kong due to crypto initiatives and industry-friendly regulations. Despite its smaller population, Hong Kong is described as an "extremely active crypto market," with notable transaction volumes and increasing interest from banks, private equity firms, and high-net-worth individuals.
Hong Kong's Crypto Initiatives Could Boost East Asia's Crypto Activity, Says Chainalysis
Recent developments in Hong Kong's cryptocurrency landscape could potentially provide a boost to crypto activity in East Asia, according to a report from blockchain analytics firm Chainalysis. The region, which experienced a decline in crypto activity following China's bans on trading activities in 2019, may see improved prospects due to optimism generated by crypto initiatives and industry-friendly regulations in Hong Kong. Despite its smaller population, Hong Kong is recognized as an "extremely active crypto market" with substantial transaction volumes and growing interest from banks, private equity firms, and high-net-worth individuals.
The report indicates that between July 2022 and June 2023, East Asia's share of cryptocurrency transaction value represented only 8.8% of the global total, making it the fifth most active crypto market. This decline was notable, considering that East Asia accounted for around 30% of crypto transaction value in 2019. China's wide-ranging bans on crypto-related activities significantly impacted the region's crypto landscape.
Chainalysis points out that Hong Kong's recent initiatives and regulatory developments are contributing to renewed optimism. Despite its relatively small population, Hong Kong stands out as an active crypto market, with an estimated $64 billion in crypto transactions between July 2022 and June 2023. This figure is noteworthy, especially when compared to the $86.4 billion in crypto transactions in mainland
China, considering Hong Kong's population is only 0.5% of the size of the mainland.
Merton Lam of CryptoHK, an over-the-counter digital asset trading center in Hong Kong, highlighted the increasing adoption of cryptocurrencies in the investment portfolios of banks, private equity firms, and high-net-worth individuals in the region. Additionally, Chinese state-owned businesses have recently launched investment funds focused on cryptocurrencies.
While acknowledging Hong Kong's growing role in the crypto space, Dave Chapman of OSL Digital Securities emphasized that it is still too early to determine if China has fully embraced the cryptocurrency sector. He suggested that Hong Kong's promotion as a potential crypto hub might be an exploratory approach to understanding digital assets without necessarily reflecting the Chinese government's stance on crypto. Markus Thielen, Head of Research and Strategy at Matrixport, sees Hong Kong as a "testing ground" for broader cryptocurrency adoption in China, particularly in attracting the crypto asset management industry.
(BRAYDEN LINDREA, COINTELEGRAPH, 2023)