Hong Kong leads East Asia in crypto transaction growth
An analysis of data recently published as part of Chainalysis’ Global Cryptocurrency Adoption Index demonstrates that Hong Kong has recorded a year-on-year crypto transaction value growth rate of 85.6%.
On that basis, the territory accounts for the sixth-largest crypto economy in the world. Furthermore, Hong Kong ranks 30th in terms of global crypto adoption. That’s an improvement of 17 places, as it was ranked 47th in 2023.
Regulatory framework aiding crypto adoption
An excerpt from the 2024 Geography of Cryptocurrency Report by Chainalysis was published on September 18. It found that the steps taken in the Chinese autonomous territory in terms of laying down a regulatory framework for digital assets has led to this uptick in transactional activity, due to the increased adoption of digital assets by institutions.
Over the course of the past eighteen months, Hong Kong has launched crypto trading licensing. Earlier this year, exchange-traded funds (ETFs) were given the green light, with the subsequent launch of Bitcoin and Ethereum ETF products.
On the topic of ETF’s, Kevin Cui, CEO of digital asset trading platform OSL said that “as market conditions improve, we are seeing indications of a growing institutional interest that could lead to increased capital inflows in the near future.” Meanwhile, the Chinese autonomous territory is working towards the establishment of regulations that cover the issuance and trading of stablecoins.
Hong Kong key to Chinese crypto resurgence
In terms of crypto adoption, mainland China ranked 11th this year, dropping down one place by comparison with last year. The report notes the complicated history China has had with cryptocurrency in recent years, given that a crypto trading ban remains in place. However, last year’s report pointed to the strong usage of centralized crypto exchanges by mainland China residents, which suggests that the ban has either been ineffective or poorly enforced.
The Chainalysis report speculates that “Hong Kong may finally influence China to re-open its doors to crypto.” This is not the first time that Chainalysis has made such an assertion. In last year’s report, it made a similar claim, suggesting that the development of Hong Kong as a crypto industry hub would lead to a softening in the stance of mainland China towards crypto.
This year’s report suggests that mainland China residents have turned to over-the-counter (OTC) platforms in order to access crypto as a means towards preserving their wealth. The report quoted Ben Charoenwang, associate professor of finance at the INSEAD Asia Campus as stating:
“Nowadays, if you want to move money out of China through traditional unofficial means like using mules, fees can be as high as 25 to 30 percent. The increasing use of OTC crypto in China suggests that people are looking for faster options to move money.”
The report finds that five of the top 50 grassroots adopters of crypto, South Korea, China, Japan, Hong Kong and Taiwan, are located in East Asia. South Korea leads the region in terms of the most crypto value transacted metric. Chainalysis suggests that South Korea’s strong interest in altcoins signals that it will remain a leader in the region from a cryptocurrency innovation perspective.
