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Hong Kong’s burgeoning cryptocurrency market is attracting wealthy investors, families, and well-established financial institutions. However, the government’s strict rules implemented to reduce illegal activity are limiting growth.
While mainland China has banned crypto mining and trading since 2021 because of concerns over financial stability and negative environmental impacts, Hong Kong is positioning itself as a global hub for digital assets.
According to CNN, Morgan Stanley’s China economist Jenny Zheng said in July that crypto is limited to “well-capitalized issuers.” However, crypto exchange shops are reportedly cropping up at retailers and ATMs throughout the city.
With its Stablecoins Bill that went into effect in August — the first federal system for stablecoin issuers that requires them to be fully backed by high-quality, liquid assets, such as the U.S. dollar — the region aimed to attract major investors.
The new legislation will permit businesses to issue stablecoins, but some interested issuers have expressed caution about applying for a license due to the high compliance costs and strict anti-money laundering rules outlined in the latest bill.
CNN reported that the Hong Kong Monetary Authority would issue licenses to just a “handful” of applicants during the first licensing round in early 2026. Global companies, such as the Bank of China and JD.com, an e-commerce company, have shown interest in obtaining a license, along with several other major firms.
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While the regulations appear to be good news for the crypto market, the industry’s environmental impact is a common topic of discussion. Crypto mining data centers require large amounts of water and electricity — some of which is still supplied by fossil fuels.
However, many operations have started powering their facilities with clean energy, and some are even using a portion of profits to fund sustainable projects and renewable energy development.
The success of stablecoins in Hong Kong hinges on how the first licensing round goes, but Yat Siu, executive chairman and founder of game software and venture capital company Animoca Brands, is optimistic, calling the city’s stablecoin system “the most advanced in Asia.”
“It puts it ahead of almost any other Asian jurisdiction, because no other Asian jurisdiction has a stablecoin law that allows you to license it from central bank,” he told CNN. “It’s going to be a blueprint for others.”
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If the stablecoin rollout turns out as expected, it “could pave the way for an offshore yuan-backed token and further adoption of the technology eventually,” per the news outlet.
“I think when they look at Hong Kong, they see an opportunity to trial and experiment some of the ideas they might want to bring to mainland China. And so, this is just a perfect laboratory to trial some of these bleeding edge technologies,” bitcoin investor David Bailey told CNN.
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