Crypto Reenters China: A Power Play in Disguise

By Jurica Dujmovic

Hong Kong's recent push to become a crypto hub has opened opportunities not only for crypto companies, but also for state-affiliated Chinese banks.

However, as Chinese banks and institutions unexpectedly take advantage of Hong Kong's crypto-friendly environment, we have to ask: Is this a genuine shift in China's attitude toward cryptocurrencies … or merely an attempt to exert control over the emerging market?

Today, we are speaking with expert Gabriella Kusz — CEO of the Global Digital Asset and Cryptocurrency Association — to hear her insights on this topic.

Jurica Dujmović: What are the implications of China's involvement in Hong Kong's crypto scene? Do you think this indicates a change in stance, or is it an extension of control?

Gabriella Kusz: From my experience working alongside China and observing its government's reactions toward crypto and digital assets, I believe we are seeing an extension of control. The open-for-business Hong Kong model should be seen as a honey trap to lure foreign direct investment and technological development into mainland China.

As we have seen in the past, this makes firms susceptible to intellectual property theft. And the Chinese government can claim certain technologies as state property or limit these firms' ability to leave China.

Jurica: What are the possible reasons behind China's strategic approach to the Hong Kong crypto market?

Gabriella: China is realizing that banning crypto is not a viable option, and the only alternative is to try to lead in the digital era. The Chinese government's stance is transitioning from being heavily adversarial toward crypto to being warmer and welcoming.

Its intention is to participate in the development of this technology to influence, shape and manipulate its direction. This strategic approach is very much about co-opting, leading and ensuring geopolitical positioning in the digital financial future.

Remember that technology is always created by humans, and those humans imbue their principles, values and beliefs into the design of that technology. If I am a person who believes in economic freedom, freedom of speech and privacy, then those types of values naturally — even maybe unconsciously — are imbued into the technology that I am building.

Alternatively, let’s say it is designed, developed and led by a society that does not value privacy and believes there is no such concept as freedom of thought or economic freedoms. Then, those same values could get transmitted into that technology.

Jurica: Can you elaborate on the impact of Chinese banks' collaborations with Hong Kong crypto businesses on the global crypto ecosystem?

Gabriella: I think this is very much about ensuring control. The Chinese banks — which are predominantly state-owned and thereby an extension of the CCP — aim to have a strong degree of control, ownership and influence. This could have a significant impact on the global crypto ecosystem, as China's influence may shape the direction of the industry in the long term.

Jurica: Finally, how might Hong Kong's regulatory framework influence China's approach to crypto?

Gabriella: China may be using Hong Kong as a sandbox, adopting a lighter touch approach for now to see how they can maintain control and lead with their ideology. However, there is no guarantee that this openness will continue.

Firms from the U.S., Europe, Asia and the Middle East need to be mindful of this if they are considering a shift into Hong Kong. It is essential that businesses approach this situation with open eyes and understand the broader strategic aspects, as well as potential long-term risks.

Jurica: Thank you, Gabriella, for sharing your valuable insights.

So, it seems that China's involvement in Hong Kong's crypto scene is a complex and calculated move. Any businesses thinking of moving to China need to approach with caution and a clear understanding of the broader strategic implications involved.

Although the future of crypto in Hong Kong and China remains uncertain, companies must be prepared to adapt to the ever-changing regulatory landscapes and geopolitical dynamics around the world.

As the digital asset and cryptocurrency space continues to evolve, the importance of understanding global developments and their implications cannot be overstated.

Both individual investors and businesses alike will need to stay informed to make strategic decisions.

We appreciate Gabriella Kusz's expert insights, which provide valuable guidance for stakeholders navigating the complex interplay between China, Hong Kong and the crypto industry.

Overall, the future of crypto in Hong Kong is undoubtedly a topic to keep an eye on as the industry continues to grow and mature. And with each new development, we will be sure to keep you up to date on the latest headlines.

Best,

Jurica