November 13 2025
An intriguing chess game is emerging in the world of digital assets, and President Donald Trump's statements could provide some guidance. During an interview with 60 Minutes on November 2, 2023, Trump emphasized that China is a serious competitor in the cryptocurrency space. This is remarkable, as Beijing banned all cryptocurrency trading and mining in 2021. How can we understand this apparent contradiction?
The gap between China's formal stance and the dynamics of the crypto market is complex. While the People's Republic prohibits the trading of digital assets domestically, the country appears to be actively pursuing digital developments on several fronts. This manifesto is closely related to Hong Kong's distinct status, where, unlike the mainland, crypto initiatives are actually encouraged. Consequently, Trump is likely sketching a broader narrative about "China," in which crypto developments in Hong Kong are seen as part of the national strategy.
On September 24, 2021, the People's Bank of China issued a regulation declaring all cryptocurrency transactions illegal. This ban not only affects trading on domestic exchanges but also criminalizes services that facilitate cryptocurrency. Since then, no major news source has reported a policy shift in this direction.
The Chinese government's measures have effectively achieved their short-term objectives: foreign exchanges have relocated to other jurisdictions, the domestic mining sector has collapsed, and the population's access to speculative cryptocurrencies has been significantly restricted. However, what the regime has not been able to eliminate are the fundamental reasons why individuals are interested in crypto: capital movement, rapid cross-border payments, and distrust of traditional financial intermediaries. These concerns have found their way into Hong Kong's regulated markets, over-the-counter stablecoin channels, and even into the mainland's digital currency initiatives.
Hong Kong is pursuing a policy that is eagerly working in the opposite direction. The Securities and Futures Commission (SFC) introduced a licensing framework for virtual asset platforms in June 2023, facilitating investor access to approved tokens on compliant exchanges. By April 2024, even Bitcoin and Ethereum ETFs had been approved, products not yet available on the mainland.
With the recent announcement on November 3rd, these licensed platforms now also have access to global liquidity sources, enabling them to truly compete with international giants like Binance and Coinbase. This connection is crucial. It offers so-called "sophisticated traders"—who prefer to comply with regulations without sacrificing execution quality—viable alternatives that make it easier to invest in crypto.
Trump's comments about "China" seem to point to a more complex narrative, one in which the Hong Kong Special Administrative Region, with its de facto policy autonomy and regulatory initiatives, is being merged with the mainland.
The digital yuan (e-CNY) pilot represents the world's largest rollout of a central bank digital currency, with cumulative transactions exceeding ¥7 trillion by mid-2024. Hong Kong began accepting e-CNY at local merchants in early May 2024, strengthening the connection between the mainland's digital infrastructure and an international financial hub.
Yet, the e-CNY functions as a programmable state currency, centralized and monitored, with the aim of strengthening Beijing's monetary control rather than challenging it. This stands in stark contrast to Bitcoin and other forms of decentralized finance; e-CNY doesn't integrate any of the decentralization principles that characterize crypto ideology. All of this makes it easier for China to position itself as a leader in digital finance, especially given the ban on decentralized alternatives.
The gaps in enforcement and economic incentives have led to the emergence of a parallel system. A growing number of Chinese exporters are accepting USDT (Tether) for cross-border payments, circumventing the slowness of bank transfers and capital controls. This adaptation is not centrally coordinated, but its scale is such that Beijing cannot possibly ignore it.
The use of stablecoins has also increased in trade relations between Russia and China, primarily because Western sanctions are putting pressure on traditional banking methods. As a result, stablecoins function as crucial infrastructure in transactions that the formal financial system often cannot handle. The subtle nuances between the use of crypto for commercial purposes versus investment speculation are all the more relevant, as the government appears to tolerate stablecoins operating as infrastructure, despite the fact that these activities are not legalized.
Moreover, China's hashrate hasn't stalled after the 2021 mining crackdown. According to Cambridge's mining map, there's continued activity, stemming from mining operations that have moved to remote provinces or where the hardware has been shipped overseas while remaining under Chinese ownership. Crucially, Chinese companies continue to invest in the production of equipment that secures global cryptocurrency networks.
Trump's claim about China's crypto market likely reflects less a policy shift on the mainland or secret intelligence, and more the complexity of the current reality. His statement that "China is big in crypto" encompasses a fusion of several phenomena; from the licensed markets in Hong Kong growing to global liquidity, to the oversight of exporters handling their USDT trades, and Chinese hardware manufacturers providing crucial support to global mining infrastructure.
The Hong Kong announcement is significant because it expands the possibilities under which Chinese capital can legally access the crypto markets. While the mainland's ban remains in place, Hong Kong offers access to international markets that act as a kind of regulatory arbitrage for mainland investors. This explains the perception that China, despite its ban on retail crypto, is not alone in the crypto space; it presents itself as a country with multiple perspectives on the crypto industry.
The trade context within which Trump is speaking is a strategically competitive landscape that, in practice, is far from simple. The real threat comes from Hong Kong's regulated alternatives, Beijing's CBDC infrastructure, and exporters using stablecoins, rather than from a sudden organization of decentralized finance in China. What Trump describes as "very high levels of involvement" is not so much a policy reform as a recognition that China has found ways to participate in the crypto markets without legalizing the activities the authorities fear most: unregulated retail speculation in decentralized assets.
Why is China banning cryptocurrency if it is so active in the digital economy?
China's policy reflects a strategic balance between control and innovation. While the mainland's ban minimizes the risks of speculation, Hong Kong encourages the development of a regulated crypto market, allowing the benefits of digital assets to be reaped without the risks faced by regular investors.
What are the implications of Hong Kong's regulations for European investors?
The opening of the Hong Kong market presents opportunities for European investors to become involved in a regulated environment where they can benefit from access to global liquidity without running afoul of local laws.
Could China Ever Lift Its Ban on Cryptocurrency?
While it's difficult to predict, it seems unlikely that China will lift its ban on digital assets without significant changes to the national strategy regarding financial control and entrepreneurship. Until such changes occur, the current approach will remain in effect.
Bitcoin (BTC)
Ethereum (ETH)
XRP (XRP)
