Over the past few years, looking at China’s cryptocurrency policies, some truly intriguing contradictions have come to light. While the mainland continues to impose strict prohibitions, Hong Kong is, somewhat unexpectedly, accelerating in a forward-looking direction. I believe this dual strategy is actually quite calculated.

Five years after the major crackdown in 2021: in mainland China, cryptocurrency trading and mining are still illegal. Beginning with the tightening of regulations during the ICO boom in 2017, and in 2021 including a ban on financial institutions providing crypto-asset services, crackdowns in major mining regions, and ultimately a comprehensive trading ban. As a result, China’s mining businesses and exchanges—once a global leader—began to move overseas one after another. Major hardware manufacturers such as Bitmain have also shifted their operations primarily abroad since then.

What cannot be overlooked, however, is that the Chinese government itself may actually hold a substantial amount of cryptocurrency. The Plustoken scam is a case in point. Discovered in April 2018, the incident is estimated to have siphoned off assets totaling $2.2 billion from more than 2.6 million victims. The assets confiscated by authorities included a wide range of cryptocurrencies, such as Bitcoin, ETH, XRP, LTC, EOS, and more. Assets related to Plustoken have continued to show complicated movements since then. There are also reports that, in 2024 alone, more than $445 million worth of ETH was moved from related addresses. According to speculation by on-chain analysts, some of the seized assets may have been sold and then routed through mixers, ultimately flowing into multiple exchanges. In other words, the Chinese government itself is not able to stay entirely unrelated to the crypto market.

What’s interesting is China’s response as the US tightens stablecoin regulations. In July 2025, under the GENIUS Act signed by President Trump, the US placed strict controls over the issuance of stablecoins. This could further strengthen the international influence of dollar-denominated stablecoins. At present, the renminbi accounts for only 2.9% of global payments. Under these circumstances, what China is focusing on is the digital yuan (e-CNY). It can be seen as a strategy to reduce dependence on the US dollar and strengthen currency sovereignty.

That’s where Hong Kong comes in. In August 2025, the Hong Kong Monetary Authority implemented a stablecoin ordinance, introducing a licensing system for stablecoin issuers. This is not just regional regulation—it functions as a strategic “experimental ground” for the central government. While maintaining strict prohibitions in the mainland, China advances managed innovation in Hong Kong. With this dual structure, China can minimize risk while monitoring and learning from international crypto-asset developments.

Hong Kong’s regulatory framework is designed quite rigorously, including capital adequacy ratio requirements, segregated management of reserve assets, and anti–money laundering measures. This is helping establish Hong Kong’s position as a major hub for crypto-asset innovation across the Greater China region, and interest from institutional investors is also increasing. Some notable individuals have also been paying attention to these developments, looking forward to Hong Kong’s legal stability and its role as a bridge between East and West.

Behind this strategy is the goal of balancing national control with economic opportunities. In the mainland, strict regulation is used to control financial risk, while leveraging Hong Kong—this “special administrative region”—helps prevent China from being left behind in global competition. Taking lessons from the past, such as the Plustoken incident, China is evolving toward a more refined approach.

Going forward, how much influence the experiments in Hong Kong will have on mainland policies, and to what extent the digital yuan can become internationalized—these will likely be key factors determining the direction of China’s cryptocurrency strategy. At least, there are clearly signs that China is shifting away from a one-dimensional approach of “a total ban” and toward a more strategic and flexible response.