Hong Kong woos mainland China crypto firms in push to bolster finance hub status

After years of bankers quitting Hong Kong amid a China security crackdown and tight Covid curbs, the city is rolling out the red carpet to a finance sector tarnished by events elsewhere in a bid to bolster its status as a finance hub - cryptocurrencies.

While scandals and high-profile bankruptcies have prompted some governments to distance themselves from the cryptocurrency industry, Hong Kong is pulling out all the stops to court mainland China crypto companies to rebase in the city. Mainland China banned cryptocurrency trading in 2021.

Top government officials, such as Hong Kong chief executive John Lee, are touting their support and the city is scheduled to hold 100 crypto-related conferences and lavish parties through April.

The Hong Kong government "is very serious about building an international virtual asset centre", said Xiao Feng, chairman of Hong Kong crypto exchange HashKey, which saw 13,000 people attend the first day of its Hong Kong Web3 Festival, the biggest conference of the month, on Wednesday.

HashKey received a license to operate in Hong Kong last November, making it one of two licensed crypto exchanges in the city besides rival exchange OSL.

According to Xiao, many in the crypto industry thought Hong Kong would inevitably adopt the same regulations as mainland China. But he said that the government is now trying to emphasise Hong Kong practices different laws from mainland China under the "One Country, Two Systems" framework.

To be sure, many remain sceptical on Hong Kong's promise of a stable regulatory regime on cryptocurrencies. One crypto venture capitalist, who declined to be named citing the sensitivity of the matter, said that he remained worried as China's crypto ban still looms large in the background.

"If Hong Kong can suddenly say that it is crypto-friendly as if it's a switch, that switch can be just as suddenly turned off should things get difficult," he said.

Still, at least 10 companies with Chinese founders including OKX, Bybit, Huobi have announced or are planning to announce their bid for licenses in Hong Kong, according to the firms and media reports.

These firms, which have exited countries like Canada and Britain, are among the sponsors of the glitziest Hong Kong parties this week. Bybit held a private dinner for industry heavyweights where delicacies from Hiroshima oysters to fish maw soup were served, while OKX booked a rooftop venue with a vista over the entire Victoria Harbour.

At one event on Tuesday, crypto entrepreneur Justin Sun told a mainly Chinese-speaking audience: "I can't believe that we are having such conferences on Chinese soil." Sun has been charged by the US Securities and Exchange Commission (SEC) with fraud, but said the SEC's charges lacked merit and accused the regulator of targeting crypto players.

"Hopefully one day, we will have such events in Shanghai and Beijing," Sun said.