Wu Jiexhuang, a member of Hong Kong’s Legislative Council, suggested that Hong Kong should leverage China’s “one country, two systems” policy to incorporate Bitcoin into its national reserves. Speaking to the state-owned newspaper Wen Wei Po, Jiexhuang proposed that Hong Kong could study the market impact of U.S.-based spot Bitcoin exchange-traded funds (ETFs).

Jiexhuang pointed to smaller countries, such as El Salvador and Bhutan, that have integrated Bitcoin into their strategic reserves, as well as certain U.S. states. He also mentioned U.S. President-elect Donald Trump‘s proposal to recognize Bitcoin as a strategic reserve asset, which could significantly impact traditional markets.

China’s Role in Ensuring Hong Kong’s Financial Stability

According to Jiexhuang, Hong Kong authorities should make good use of the “one country, two systems” framework, first by trying to incorporate Bitcoin into ETFs before exploring further ways to increase Hong Kong’s Bitcoin holdings.

Jiexhuang emphasized Bitcoin’s potential to attract talent and investment while also reinforcing financial stability amid market fluctuations. He argued that holding Bitcoin as part of national reserves could mitigate disruptions caused by wider adoption in traditional markets, providing Hong Kong with a first-mover advantage.

The report also mentioned that Hong Kong’s Financial Services and the Treasury Bureau will develop cryptocurrency regulations based on the “same business, same risks, same rules” philosophy.

Jiexhuang concluded, “If major economic powers take the lead in including Bitcoin in strategic reserves, the value of Bitcoin will become more stable, causing other countries to follow suit and reduce their holdings of traditional assets.”

He added, “This would lead to a decrease in the price of traditional assets and shrink the fiscal reserves held in traditional assets by governments.”

Hong Kong Regulators Aim To Make A Significant İnvestment in Bitcoin

According to the report, China currently holds 190,000 Bitcoin through various confiscation efforts, making its Bitcoin reserve second only to that of the United States.

In mid-2024, another Hong Kong Legislative Council member, Johnny Ng, announced plans to collaborate with various stakeholders to assess the feasibility and potential benefits of incorporating Bitcoin into the special administrative region’s financial reserves.

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Ng emphasized the increasing global awareness of Bitcoin, noting that it has become a key element in discussions about digital assets and their integration into traditional financial systems.

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Ng, a member of the Legislative Council, recently highlighted the problem in a social media post. He stated that Web3 companies are struggling to establish bank accounts, “hindering their ability to conduct business effectively.”

Ng proposes a solution: “Virtual banks should diversify their services and develop in a complementary manner to traditional banks.” He further suggests empowering virtual banks to manage virtual assets, aligning with the government’s Web3 development goals.

To understand the extent of the problem, Ng’s team conducted a survey with over 120 crypto and Web3 firms that entered Hong Kong after 2022, as reported by Sing Tao Daily.

This difficulty in securing bank accounts persists despite the government’s commitment to establishing Hong Kong as a crypto hub. In 2022, they implemented a welcoming policy for crypto firms, and June 2023 saw the official launch of a crypto licensing regime for trading platforms. This allows licensed exchanges to offer retail trading services.

However, another Hong Kong lawmaker, Duncan Chiu, has expressed concerns about the “excessively stringent” regulations for obtaining a crypto exchange license. He argues that these strict rules discourage major global exchanges from entering the Hong Kong market. Notably, several exchanges, including OKX, Gate.io, and HTX, have withdrawn their license applications in Hong Kong.

Ng and Chiu’s concerns highlight the need for a balanced approach. While regulations are necessary to ensure a secure and compliant environment, excessive restrictions can stifle innovation and hinder the growth of the crypto industry in Hong Kong.

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