A Tale of Two Chinas

For our regulatory commentary this week, we are shifting our focus outside the U.S. to take a brief look at developments in the second largest economy in the world: China. On March 21, the Beijing Internet Finance Industry Association released a statement reaffirming the country’s anti-STO policy, echoing previous anti-crypto statements from the People’s Bank of China, the Ministry of Public Security, and other government entities. Having banned ICOs in 2017, the Beijing Municipal Bureau of Finance in late 2018 directly labeled STOs as “illegal,” the first time a national government has made such a proclamation. This most recent statement declares STOs to be “solicited illegal financial activity.”

While China’s hostile stance is nothing new (despite reports that it is developing its own centrally-controlled cryptocurrency), we find it interesting that exactly one week after Beijing’s latest statement on STOs, Hong Kong weighed in with its own guidance. The statement by Hong Kong’s Securities and Futures Commission (SFC) on 28 March “serves as a reminder about the legal and regulatory requirements applicable to parties engaging in STOs.” The statement notes that STOs are likely to be subject to Hong Kong’s securities laws, and lays out the relevant requirements for those marketing and distributing security tokens, including licensing and registration, due diligence, and transparency with clients.

While the timing of these dueling policy statements is curious, what is more intriguing to us is the geopolitical dynamic that has evolved, where Mainland China remains one of the most directly anti-crypto countries in the world (despite its global economic clout), while one of its sovereign territories is embracing a constructive — if wary — regulatory approach consistent with its position as a significant hub of Asian financial activity. With Japan, South Korea, and Singapore already serving as important players in the crypto world, the global center of gravity would be significantly altered if Mainland China were to shift its stance, or if Hong Kong were to further emerge as a viable alternative to mainstream Chinese adoption. In the interim, BitOoda will continue to engage with our partners in Asia to ensure we take advantage of technology and market opportunities wherever they develop.

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