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Why China’s Crypto U-Turn Matters 

China continues reopening to cryptocurrency, with its Hong Kong regulator set to resume limited crypto trading. 

This guide discusses how China’s flip-flopped back into cryptocurrency and why this matters. 

China’s desire to re-open to cryptocurrency took a big step forward. 

This week Hong Kong’s Securities and Futures Commission (SFC) announced that proposed digital asset guidelines would come into force on June 1, with retail investors able to trade BTC, ETH and large-cap cryptocurrencies on registered platforms. 

It’s crucial because it gives centralised exchanges the green light to service Chinese users. 

The importance of allowing Chinese residents access to crypto platforms cannot be overstated. 

It creates a place for Chinese users to invest in the crypto ecosystem, making Hong Kong China’s crypto hub. 

It could also present a source of future demand pressure and indicate that Hong Kong is a testing ground for possible greater relaxation in mainland China.  

The new licensing rules are making headlines across China’s central public broadcasters.  

A slow rollout 

Don’t expect all cryptocurrencies to be made available. 

The guidelines greenlight BTC, ETH, and a few large-cap cryptocurrencies (mostly L1 blockchains), such as SOL, will be the first to be made available. Stablecoins are prohibited, as well as “Earn” programs.  

Unpacking China’s many crypto “bans.” 

The Chinese government made headlines in the last two years as they heavily restricted the industry. 

  • Banned crypto miners 
  • Tightened access to crypto trading services. 
  • Prohibited financial institutions from engaging in crypto transactions. 

However, it didn’t make crypto ownership illegal. 

China’s love-hate relationship with crypto isn’t new, and if you’ve been in the industry long enough, you would have experienced dozens of China “bans”.  

See this fantastic China bans summary courtesy of @sinazhr via Trading View. 

It shows the diverging approaches of China and the U.S. regarding crypto. 

China’s new open approach to crypto is no surprise. Last month, Hong Kong regulators reminded banks that there is no “ban” prohibiting banks from providing banking services to crypto firms. 

It comes as the U.S. remains relatively hostile to the industry, refusing guidance in favour of enforcement, forcing companies such as Coinbase and Gemini to move products offshore. 

Will this lead to a leg higher? 

This alone will unlikely move crypto prices higher in the short term to new ATHs. After all, we’ve had a sizeable year-to-date rally, with a contraction or move lower not out of the realm of possibility. 

However, the medium to long-term impacts could be positive, as it opens up more favourable conditions for crypto in China and the many billions of citizens to access crypto services. 

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