According to a report by research firm Chainalysis, cryptocurrency activities in East Asia have been on the decline in recent years due to Beijing’s crackdown on the market. However, Hong Kong’s new virtual asset-friendly policies offer a glimmer of hope for the region.
The data from Chainalysis shows that the value of cryptocurrency transactions in both mainland China and Hong Kong has dropped over the past year. This is mainly due to Beijing’s strict ban on cryptocurrencies in the mainland and the overall slump in the crypto market. Despite this decline, Hong Kong remains an extremely active crypto market, receiving an estimated $64 billion in crypto transactions for the year.
However, this is still a slight decline compared to the same period a year earlier when over $70 billion was traded in Hong Kong. Both Hong Kong and mainland China fell one spot in Chainalysis’ latest global cryptocurrency adoption ranking published last month. This decline in crypto activities can be attributed to the market crash and uncertainties in the global economy, along with high-profile crypto firm collapses.
Institutional investors and high-net-worth individuals are the main drivers of crypto trades in Hong Kong, with institutional transactions making up 46.8% of the market. Retail investors, on the other hand, contribute just 4% of the trades. This indicates that the market is largely driven by large transfers facilitated by trade desks in the city.
Since October 2021, Hong Kong has been actively courting the crypto industry by unveiling new virtual asset regulations and promising greater investor protections. This has created a potential tailwind for the region and fostered optimism among industry players.
Despite the decline in crypto activities, Chainalysis believes that Asia will continue to drive adoption due to factors such as speculative investments, the ability to move wealth out of local banking systems, and making international payments with stablecoins. These factors have made cryptocurrencies controversial but also contribute to their adoption in the region.
In conclusion, while cryptocurrency activities in East Asia have declined in recent years, Hong Kong’s virtual asset-friendly policies offer hope for the region. The city remains an active crypto market, attracting institutional investors and high-net-worth individuals. With the implementation of new regulations and promises of greater investor protections, Hong Kong aims to position itself as a leading hub for the crypto industry in the region.