| One of crypto’s greatest historic hubs might be back in the game.
Hong Kong, the Chinese city that was once the premier spot for crypto innovation, is now considering legalizing retail crypto trading. We say “was” because although Hong Kong was at one time a market leader, it has declined in recent years due to zero-covid policies and Chinese anti-crypto crackdowns.
If the reports are true, the consequences are potentially massive.
A Dimming Star
Hong Kong and Greater China are, by and large, the birthplace of crypto. As Arthur Hayes points out, socialized loss derivatives margin systems, margin trading, stablecoins, perpetual swaps, and today’s dominant exchange (Binance) all come from Hong Kong and Greater China.
Unfortunately, due to Chinese crackdowns on crypto and damaging zero-covid policies, much of Hong Kong’s crypto citizenry left for Dubai, the Bahamas, and Singapore. As a result, what once was the world’s crypto hub is now no longer even the crypto hub of Asia.
Now, Hong Kong wants the crown back.
But why?
One theory is that Hong Kong and China are concerned over Singapore’s growing financial might. It makes sense, seeing how Singapore is Hong Kong’s leading economic and cultural competitor.
Hayes has another more interesting theory. He breaks it down better than we ever could, but it basically comes down to China having too much USD and not enough trust in the US government.
Recent moves by the US government, such as the control of chip exports, are exacerbating the rift between the two world superpowers.
And, as was evident by the West’s sanctions against Russia, just because you hold US securities, doesn’t mean in the long run they are actually yours. China saw what happened with Russia and, most likely, quickly realized that they hold too much US debt.
Simply put, China needs to reduce its USD exposure. But, what to buy?
Of course, they could follow the Russian playbook and purchase hard assets such as gold, but that could take years.
Perhaps the cleaner (and quicker) play is to buy Bitcoin.
What This Means For Investors
This is some of the best news you’ll ever see as an investor.
Besides the fact that this would allow Hong Kong and Chinese capital to flow back into the market, it would also mean that Hong Kong developers would again be able to build and innovate.
The city has historically been a critical contributor to crypto’s growth. There’s no reason it can’t be again. | 