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Chinese Crypto Coins like Conflux React Positively to Hong Kong Regulatory News

The stance of China towards cryptocurrencies has always been rather negative. The country has banned the usage of major cryptocurrencies as well as their mining several times in the past and no bans have been lifted yet.

Thus, stating that China has a complicated relationship with Bitcoin and cryptocurrencies, and the government has a history of implementing strict measures to regulate and even ban their use, would not surprise anyone, who has been following cryptocurrencies for some time. surprise up its sleeve as it looks like there might be a chance for brighter tomorrows.

History of a difficult Chinese relationship with cryptocurrencies

Before we dive deeper into the “surprise,” first let’s recap the main points connected to China and cryptocurrencies. It all started in 2013 when the People’s Bank of China (PBOC) issued a notice warning about the risks of Bitcoin, stating that it was not a currency and should not be used as a medium of exchange. Despite this, the government did not ban Bitcoin outright, and it continued to gain popularity among Chinese investors and traders.

In 2017, however, the Chinese government began to crack down on cryptocurrency activities more aggressively. In September of that year, the PBOC announced that it would ban initial coin offerings (ICOs), at that time a very popular fundraising method for cryptocurrency. The government also ordered all cryptocurrency exchanges in China to shut down.

The ban had a significant impact on the cryptocurrency market, as China was one of the largest markets for Bitcoin and other digital currencies. The price of Bitcoin plummeted by over 20% following the announcement, and many Chinese investors and traders were forced to liquidate their holdings.

Since then, the Chinese government has continued to implement strict measures to regulate cryptocurrencies. In 2018, the government blocked access to foreign cryptocurrency exchanges and websites, making it more difficult for Chinese investors to trade digital and currency mining NDRC. on a list of industries that it planned to phase out. 

In May 2021, the Chinese government ramped up its crackdown on cryptocurrencies once again. The government ordered all Bitcoin mining operations in the country to shut down, citing concerns over energy usage and financial risks. China was responsible for over 50% of global Bitcoin mining hashrate at the time.

It seemed that a ban like this might have put a real blow into the future of Bitcoin and other cryptocurrencies. However, since then, the cryptocurrency adoption and development seemed to be thriving without any regard to the Chinese complicated bans. And as it turns out , the future might just as well become a bit more positive as per a rather recent announcement.

A sudden unexpected shift?

No matter what the news, bans or the overall relationship has been before, currently it seems that China is slowly turning back. Even though China, its officials or the government did not announce any news, Hong Kong, one of the biggest cities in the country that is operating under the establishment of “One Country, Two Systems” came out with a pretty big announcement.

At the end of February, the Hong Kong’s Securities and Futures Commission (SFC) announced that it will open doors to the retail investors who want to trade cryptocurrency. This would be allowed for thanks to licenses that the centralized exchanges will be able to obtain.

They will need to contain details such as Know-Your-Customer (KYC), safe custody of assets, proper risk management or auditing. Anti-Money Laundering (AML) will also be part of the license that the exchanges, who would want to offer these services, would need to obtain. Once the exchanges receive this license, the retail traders should be free to buy and sell the biggest cryptocurrencies.   

While this seems like positive news connected mostly to Hong Kong, not China, the opposite is true. There is no indication that China would want to cancel its ban on cryptocurrencies. Yet, it seems that the country is willing to let Hong Kong become the cryptocurrency hub that will flourish in the district.

“As long as one doesn’t violate the bottom-line, to not threaten financial stability in China, Hong Kong is free to explore its pursuit under One Country, Two Systems.”

That was the statement of Nick Chan, member of the National People’s Congress. What is however more intriguing is the fact that many believe the stance of Chinese government officials with regards to the cryptocurrency seems to relax. First of all, it appears that the Chinese officials are giving a slight approval to the step of Hong Kong as such.

Secondly, it was reported that many officials have now been visiting some of the major cryptocurrency regulatory meetings in Hong Kong. And what is even more encouraging for the whole eastern part of the world is the fact that it seems that they were not against this step at all.

On the contrary, many have reported that Chinese officials have shown a sincere interest in the regulations of this kind, with the overall atmosphere of the meetings reported as “friendly and relaxing.”

Last but definitely not least, the officials from the country seemed to have more questions and a more intriguing approach. This was portrayed through follow-up calls and questions that many officials from Hong Kong reportedly received from the China Liaison Office representatives and other government officials, who were present at the digital currency meetings in Hong Kong.

Which cryptocurrencies have been affected the most by the announcement?

This means that the retail traders in Hong Kong might be able to trade mostly the largest cryptocurrencies. Bitcoin (BTC) and Ethereum (ETH) have been the most commonly noted when it comes to this news. Nevertheless, all of the trading would need to be done over a centralized cryptocurrency exchange with a proper license.

However, there were other cryptocurrencies that benefited from this announcement. It might not seem that straightforward, as these cryptocurrencies will probably not be traded on these exchanges under the new rules and regulations as of yet, but Chinese coins and tokens have seen a significant change in the sentiment.

If one looks at the chart of any major cryptocurrency or cryptocurrency-related project and platform from China, it is clearly visible that this news was received in a positive manner. Most of these coins and tokens have seen a huge spike in the trading volume and price.

Huge price spikes for Neo, Vechain and others

These are for instance Neo (NEO), Vechain (VET), Conflux (CFX), Cocos-BCX (COCOS) or IRISnet (IRIS). These and many other projects have rather similar price charts as of now, with the spike in price right around the time when the news related to the Hong Kong cryptocurrency retail trading came about.

Charts of Conflux (CFX) and Neo (NEO), Source: coinmarketcap.com

Just comparing the two charts above clearly shows when the news hit the market. The charts of Conflux (CFX) and Neo (NEO) are extremely similar. It needs to be remembered that these two coins, as well as other Chinese cryptocurrencies that benefited from this announcement, have nothing in common other than their geological development – China.  

Yet, this can be said about other projects from the list above. Whether that is Vechain (VET) or Cocos-BCX (COCOS), the charts of these projects are similar to one another. This can be almost without any hesitation attributed to the SFC announcement.

Charts of Vechain (VET) and Cocox-BCX (COCOS), Source: coinmarketcap.com

Looking ahead

Obviously, nothing is over yet. The bans have not been lifted and the cryptocurrency industry in the country might still be under serious regulatory pressure. However, it seems that the announcement of Hong Kong, which appears to be also supported by China in the shadows, might signify a change in the attitude of regulators in the region.

That is why many of the cryptocurrencies located in this area reacted so positively. Their future might be finally looking a bit brighter. It however still needs to be reiterated that all the formal regulatory bans that the government of China has put in place over the years, are still valid.

Conclusion

The Hong Kong news from SFC came out of nowhere. Not many people would have guessed that news such as this would come out of one of the strictest regions in the world. While this does not necessarily mean that the cryptocurrency industry in China will blossom from now on, it definitely provides a much needed relief from all the pressure that this sector had to succumb to in the past years.

 

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