Tron founder Justin Sun has urged China to reassess its position on Bitcoin, following former President Donald Trump’s endorsement of the digital currency and plans to make the U.S. the world crypto capital.
Trump pledged to create a “strategic Bitcoin stockpile” for the U.S. during his keynote address at the Bitcoin 2024 conference in Nashville on Saturday.
“As the final part of my plan today, I am announcing that if I am elected, it will be the policy of my administration, the United States of America, to keep 100% of all the Bitcoin the U.S. government currently holds or acquires into the future,” Trump stated. “I hope you do well.”
Responding to Trump’s comments, Sun, a prominent figure in the crypto world, said competition between the two countries is likely to benefit the entire industry.
“China also needs to step up. Since President Trump pushed for Bitcoin, U.S. policies have warmed. China should make further progress in this area. Competition between China and the U.S. in Bitcoin policy will benefit the entire industry,” Sun said on Twitter.
This statement comes against the backdrop of China’s historically stringent stance on cryptocurrencies.
The country, once a global leader in Bitcoin mining and trading, has implemented some of the world’s most restrictive policies on digital currencies in recent years.
In 2013, the country emerged as a powerhouse in the crypto space, with Chinese miners accounting for more than 70% of the Bitcoin network’s mining power by 2017.
However, September 2017 marked a turning point when the government banned Initial Coin Offerings (ICOs) and ordered the closure of domestic cryptocurrency exchanges.
Despite these initial restrictions, mining operations continued to thrive in China due to cheap electricity—particularly in regions like Inner Mongolia, Xinjiang, and Sichuan. This allowed China to maintain its dominance in the global crypto mining landscape for several years.
However, the situation changed dramatically in 2021. In May of that year, Chinese Vice Premier Liu He announced a sweeping crackdown on Bitcoin mining and trading.
This was followed by a series of regulatory actions, culminating in September 2021 when the government declared all cryptocurrency transactions illegal, effectively banning mining nationwide.
The Chinese government cited several reasons for this hardline approach, including concerns over financial stability, environmental impact due to mining operations’ high energy consumption, prevention of capital flight, and the desire to maintain control over the financial system.
The impact of China’s ban was felt globally.
The Bitcoin network’s hash rate dropped by over 50% temporarily, and there was a mass exodus of mining operations to countries like Kazakhstan, Russia, and the United States.
While cracking down on decentralized cryptocurrencies, China has been actively developing its own Central Bank Digital Currency (CBDC), the digital yuan.
This state-controlled digital currency is seen as a way for China to modernize its monetary system while maintaining oversight of financial transactions.
Sun’s call for China to “step up” in the realm of Bitcoin policy represents a significant challenge to this status quo, suggesting that China risks falling behind in the global race for cryptocurrency adoption and innovation if it maintains its current prohibitive stance.
Industry experts suggest that a shift in China’s Bitcoin policy could have far-reaching implications for the global cryptocurrency market.
“The U.S., especially under President Trump and following administrations, has shown growing support for Bitcoin, establishing itself as a leader in the global crypto space. If China were to take a similar path, it could lead to healthy competition between the two economic powerhouses,” Anndy Lian, author and intergovernmental blockchain expert told Decrypt. “This competition could lead to advancements in blockchain technology, better regulatory frameworks, and broader cryptocurrency adoption.”
He added that the global market would benefit from increased liquidity, enhanced security measures, and stronger infrastructure. Additionally, balanced regulations in both countries could help mitigate risks related to volatility and fraud, increasing investor confidence.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
The recent launch of Hong Kong’s new crypto regulation has sparked interest among the crypto community. The city-state is looking to fully open its doors to crypto asset trading and investment, with a focus on establishing a licensing regime for crypto service providers. The move is expected to attract capital and talent to Asia, making it a hub for the crypto industry.
Opportunities
One of the significant opportunities presented by Hong Kong’s new crypto regulation is the potential for retail investors to participate in the crypto market. Previously, only institutional investors and high-net-worth individuals had access to this market. The new licensing regime is expected to provide a more level playing field for all investors, increasing market liquidity and improving price discovery.
Hong Kong’s reputation as a financial hub could make it an attractive destination for global crypto companies seeking to expand their presence in Asia. The city-state’s strong legal framework and supportive regulatory environment could encourage crypto companies to set up shop in Hong Kong, bringing job opportunities and economic growth to the region. Another potential opportunity presented by the new crypto regulation is the potential for Hong Kong to become a leader in green finance. The Hong Kong government has expressed interest in launching tokenized green bonds for institutional investors. This could attract investors interested in investing in environmentally sustainable projects, promoting responsible investing and reducing the carbon footprint.
Risks
While the new crypto regulation presents several opportunities, it also comes with its fair share of risks. The most significant risk is the potential for increased market volatility. The crypto market is notoriously volatile, and retail investors who lack experience and knowledge of the market may be at risk of significant losses.
There is the risk of crypto scams and fraudulent activities. The unregulated nature of the crypto market has made it a hotbed for scams and fraudulent activities. The new licensing regime is expected to address this issue, but it remains to be seen how effective it will be. Another significant risk is the potential for regulatory arbitrage. As Hong Kong establishes its licensing regime, crypto companies may look to set up shop in the city-state to avoid regulation in other jurisdictions. This could result in a race to the bottom, where jurisdictions offer increasingly lax regulations to attract crypto companies.
I must highlight this. On the surface, the new regulations appear to be a positive development for Hong Kong’s crypto industry, but are there any risks involved? One of the potential concerns is that the new regulations could stifle innovation by imposing too many restrictions on the industry . For example, the proposed regulations require all crypto exchanges to have a minimum capital of HK$5 million (US$644,000), and exchanges must maintain a 1:1 reserve ratio of fiat currency to digital assets. Such requirements could be difficult for some smaller players to meet, which could hurt the competitiveness of the industry.
China’s Backing
One question on the minds of many is whether China will back out of its support for Hong Kong’s crypto ambitions. China has historically been hostile to crypto, with a ban on cryptocurrency transactions in 2021. However, recent developments suggest that China may be softening its stance on crypto
Justin Sun’s crypto exchange, Huobi Global, has announced that it is applying for a crypto trading license in Hong Kong and launching a new trading venue there. This move suggests that China may be willing to support Hong Kong’s crypto ambitions, providing a boost to the city-state’s efforts to establish itself as a hub for the crypto industry.
On the flip side, many do see potential uncertainty surrounding China’s stance on cryptocurrencies too. If you remembered in 2021, China banned cryptocurrency transactions, which sent shockwaves throughout the global crypto industry. Although Hong Kong is technically part of China, it operates under a separate legal system and enjoys a high degree of autonomy. However, there are concerns that China could still exert its influence and try to clamp down on Hong Kong’s crypto industry if it sees it as a threat to its own regulatory goals
Conclusion
Hong Kong’s new crypto regulation, which is set to establish a licensing regime for crypto service providers, presents an opportunity for the city-state to become a hub for the crypto industry in Asia. This move is expected to attract capital and talent to the region, leading to improved market liquidity and increased price discovery.
However, the new regulation also poses some risks that need to be taken into consideration. One of the risks is the potential for increased market volatility as more players enter the market. Another risk is the possibility of scams and fraudulent activities as the industry expands and attracts more investors. To mitigate these risks, the Securities and Futures Commission is adopting a “regulate to protect” approach to digital assets.
As mentioned above, there is the risk of regulatory arbitrage, which could arise if other countries in the region adopt different regulatory frameworks for crypto service providers. To address this risk, the Hong Kong Monetary Authority (HKMA) has issued its conclusions on cryptoassets and stablecoins regulation, aiming to provide clarity and consistency across the industry.
My view is Hong Kong’s new crypto regulation presents both opportunities and risks for the city-state to establish itself as a hub for the crypto industry in Asia. While attracting capital and talent, improving market liquidity and increasing price discovery are some of the opportunities, market volatility, fraudulent activities, and regulatory arbitrage are some of the risks that need to be addressed to ensure the effectiveness of the new regulatory framework.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
Taipei, Taiwan – For months, Singaporean investor Anndy Lian has been selling off Chinese stocks to reduce his portfolio’s exposure to the world’s second-largest economy.
Once a regular investor in Chinese tech companies, Lian now views China as an increasingly risky bet as the country’s autocratic turn under Xi Jinping and ongoing “zero COVID” lockdowns cast a cloud over the economy.
“I started gradually lowering my exposure since last year as that was when the downward trend became obvious, but I’ve increasingly sold off my holdings this year as things have gotten worse,” Lian told Al Jazeera,
“The instability is my biggest concern as an investor. The overall environment in China is uncertain right now, and it goes way beyond the financial sector.”
Lian is among a growing number of international investors who are pulling back from China after years of record inflows.
Overseas investors shed more than $150bn in China-based yuan-denominated assets in the first quarter of this year, the largest decline on record. Chinese bonds alone saw a $61bn sell-off between February and May. Roughly $300bn could exit the country this year, more than double last year’s outflow of $129bn, according to forecasts by the Washington-based Institute of International Finance.
Overseas investors shed more than $150bn in China-based yuan-denominated assets in the first quarter of this year, the largest decline on record [File: Qilai Shen/Bloomberg]
China’s economy barely avoided contraction in the second quarter, expanding just 0.4 percent, a dramatic decline from 4.8 percent growth during the first quarter.
Lian said the effects of last year’s crackdown on the tech sector, which decimated the stock prices of major players such as Alibaba, Tencent and Didi, are still being felt.
In one of the most prominent episodes of China’s “techlash”, ride-hailing app Didi lost 80 percent of its market cap – more than $60bn in value – within a year of going public after Chinese regulators accused the firm of violating data security rules. Facing mounting scrutiny at home, Didi delisted itself from the New York Stock Exchange last month.
“If you look at the tech crackdown last year, and how the value of a whole company like Didi can be virtually wiped out, it makes you nervous.”
Ride-hailing app Didi lost 80 percent of its market cap after Chinese regulators accused the firm of violating data security rules
Other investors, though, see room to adapt to Beijing’s tightening grip on the economy.
“Investors understand what the goals of the tech crackdown were, taking aim at inequality and related social issues, so I think that makes the sector still very investible,” Ker Gibbs, former president of AmCham Shanghai and a veteran China investor, told Al Jazeera.
“There’s always policy risk in China, and regulation moves much faster than in the US. That is something people must be accustomed to.”
Nonetheless, Gibbs said the lingering uncertainty around the Chinese economy has been a significant concern.
“For me, it’s all about the uncertainty of the lockdowns and zero-COVID and not knowing when it will all end,” he said. “Investors just can’t see where it’s headed. People don’t know what environment they’re in now.”
Beijing has given mixed signals to investors about what to expect.
While Chinese officials have promised to tweak pandemic restrictions for the sake of the economy, Xi has repeatedly ruled out shifting from “zero COVID” to living with the virus.
China has opened up new offerings of asset classes to foreign investors but also stepped up supervision of institutional investors in the country.
This month, authorities announced the launch of Swap Connect, a mechanism to allow overseas investors to participate in mainland China’s financial derivatives market.
Meanwhile, more than 80 Shanghai- and Shenzen-listed exchange-traded funds will be made available to investors in Hong Kong. Beijing has also announced it will substantially raise its currency swap with the territory to new levels to provide extra liquidity for the offshore yuan.
“There is a dramatic opening of China’s securities, insurance broking, and wealth management markets going on,” Duncan Clark, founder of Beijing-based investment advisory firm BDA, told Al Jazeera.
“The transition isn’t going to be easy, though, from N-shares [shares of Chinese companies listed in New York] to onshore Chinese listings or even Hong Kong listings. Investor confidence is shaken and Chinese issuers can’t meet face to face,” Clark added.
Lian said Swap Connect is unlikely to turn the tide of investors exiting the Chinese market.
“On the one hand, it may help attract new investors to China, but I doubt it will do much to retain those who are already moving away, and that is a bigger issue,” he said.
“It will take time to turn the tide. There will probably be a two or three-year trial phase until they get the settings right. Another question investors will ask is ‘How do we exit?’ Can they be assured they can withdraw their stock when they wish? We will have to see what the final details are when it comes out.”
Even as Beijing courts more foreign investors, it is also seeking to monitor them more closely. Last month, the China Securities Regulatory Commission formally issued guidelines mandating the establishment of communist party cells within global hedge funds that operate in China.
“I think it will be problematic, but mostly because of the optics back at headquarters in the US,” Gibbs said, noting that many hedge fund managers specifically asked him about the measures at a recent conference he attended in San Francisco.
“Those of us who operate in China long term understand the role the party plays and the importance of aligning with their goals for society. Actually, the conversations they have with you are often about issues of social compliance, like labour standards or equality, which is not necessarily a bad thing,” Gibbs added, describing the scrutiny as comparable to “Chinese-style ESG [Environmental, social and governance]”.
“But in the US, we see the CCP [Chinese Communist Party] and think of the whole party apparatus, and so the idea of a party official in the boardroom sounds much scarier from an American perspective.”
China’s handling of the pandemic has widened the perception gap between the country and global markets, according to some observers [File: China Daily via Reuters]
Some observers say that the perception gap between China and global markets has only widened since the pandemic.
“Many in China don’t realise how dramatically perceptions have changed overseas about their country,” Clark said. “The wall of zero-COVID and the Great Firewall works both ways: they keep capital out and information skewed on both sides. China will have to hustle much more to raise funds going forward. The penny hasn’t dropped yet.”
Beijing may need to work harder at retaining local capital as well.
“We need to remember this is not just about foreign capital and foreigners leaving China. It impacts everyone,” Gibbs said. “Many Chinese investors are heading out, too, to places like Singapore.”
Lian said he has noticed an increasing number of Chinese tech entrepreneurs setting up in Singapore, especially those working on blockchain-based applications.
“It depends a lot on their business structure, but I believe those who can move will continue to do so,” he said.
“So you have these startups that were founded in China, the largest market of all, by Chinese entrepreneurs, and now they are here in Singapore, and now they are bringing their capital with them. To me, that says it all.”
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
