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Hong Kong vs Mainland China: A Tale of Two Crypto Policies Under One Country

· 9 min read
Dora Noda
Dora Noda
Software Engineer

Fifty kilometers apart, two regulatory systems govern crypto with such stark opposition that they might as well exist in different universes. Mainland China bans all cryptocurrency trading, mining, and as of November 2025, even stablecoins—while Hong Kong actively courts the industry with an expanding licensing framework, spot ETFs, and ambitions to become Asia's preeminent digital asset hub. The "One Country, Two Systems" principle has never been more dramatically illustrated than in how these jurisdictions approach Web3.

For builders, investors, and institutions navigating the Greater China market, understanding this regulatory divergence isn't just academic—it's existential. The difference between operating 50 kilometers north or south of the border can mean the difference between building a licensed, regulated business and facing criminal prosecution.

The Mainland Position: Total Prohibition Reinforced​

China's stance on cryptocurrency has hardened into one of the world's most comprehensive bans. What began as restrictions in 2013 has evolved into blanket prohibition covering virtually every aspect of the crypto ecosystem.

The 2025 Crackdown Intensifies​

On November 28, 2025, Chinese financial and judicial authorities convened to reinforce their position: all crypto-related business activities are illegal in mainland China. The enforcement decree, effective June 1, 2025, established clear penalties including transaction suspension and asset seizure.

The most significant development was the explicit ban on stablecoins—including those pegged to major global or domestic fiat currencies. This closed what many considered the last gray area in Chinese crypto regulation.

Key prohibitions now include:

  • Mining, trading, and even holding crypto assets
  • Issuing, exchanging, or raising funds using tokens or stablecoins
  • RWA (Real-World Asset) tokenization activities
  • Domestic staff participation in offshore tokenization services

The enforcement framework is formidable. The People's Bank of China (PBOC) leads regulatory efforts, directing financial institutions to block crypto-related transactions. The Cyberspace Administration of China (CAC) polices the internet, shutting down websites, apps, and social media accounts promoting crypto. Technical infrastructure enabling tokenization faces active monitoring and disruption.

The Blockchain Exception​

Yet China's policy isn't anti-blockchain—it's anti-crypto. Officials announced a roadmap for national blockchain infrastructure targeting 400 billion yuan ($54.5 billion) in annual investments over five years. The distinction is clear: permissioned, state-controlled blockchain good; permissionless, token-based systems bad.

The digital yuan (e-CNY) continues receiving state backing and active development, representing China's vision for controlled digital currency innovation. By separating blockchain infrastructure from tradeable tokens, China maintains technological competitiveness while preserving capital controls and monetary sovereignty.

Underground Reality​

Despite comprehensive prohibition, enforcement faces practical limits. China is estimated to have approximately 59 million crypto users as of 2025, operating through P2P platforms and VPN-based wallet access. The gap between policy and reality creates ongoing challenges for regulators and opportunities—albeit illegal ones—for determined participants.

Hong Kong's Contrasting Vision: Regulated Embrace​

While the mainland prohibits, Hong Kong regulates. The Special Administrative Region has constructed an increasingly sophisticated framework designed to attract legitimate crypto businesses while maintaining robust investor protections.

The VASP Licensing Framework​

Since June 2023, all Virtual Asset Service Providers (VASPs) serving Hong Kong investors must hold an SFC-issued license. The requirements are stringent:

RequirementDetails
Asset CustodyAt least 98% of client assets in cold storage
Fund SegregationComplete separation of client and company assets
KYC/AMLMandatory checks and suspicious transaction reporting
Travel RuleCompliance for transfers exceeding HKD 8,000
ManagementFit and proper personnel with cybersecurity safeguards

Licensed exchanges include HashKey Exchange, OSL Digital Securities, and HKVAX—platforms that can legally serve both retail and institutional investors.

The Stablecoin Ordinance​

Effective August 1, 2025, Hong Kong introduced dedicated licensing for fiat-referenced stablecoin issuers. Requirements include:

  • Minimum paid-up share capital of HKD 25 million
  • Full reserve backing with high-quality, liquid assets
  • Regulatory approval from the Hong Kong Monetary Authority

This positions Hong Kong to host compliant stablecoin issuers at a time when mainland China has explicitly banned all stablecoin activities.

Spot ETF Success​

Hong Kong made history on April 30, 2024, launching Asia's first spot Bitcoin and Ethereum ETFs. Six virtual asset ETFs began trading on the Hong Kong Stock Exchange, issued by Harvest Global Investments, HashKey Capital/Bosera Asset Management, and China Asset Management's Hong Kong unit.

By late December 2024, Hong Kong crypto ETF assets reached $467 million—modest compared to U.S. ETF assets exceeding $122 billion, but significant for the region. The spot Bitcoin ETFs accumulated 4,560 BTC ($444.6 million), while Ether funds held 16,280 ETH ($59.6 million).

In 2025, the expansion continued with Pando Finance launching the city's first Bitcoin ETF of the year and Hong Kong approving its first Solana ETF—a product category not yet available in the United States.

The ASPIRe Roadmap​

The SFC's "ASPIRe" roadmap articulates Hong Kong's ambitions to become a global digital asset hub. On June 26, 2025, the Financial Services and Treasury Bureau (FSTB) issued its second policy statement advancing this strategic vision.

Key November 2025 developments included:

  • Expansion of products and services for licensed VATPs
  • Integration of order books with global affiliate platforms
  • Enabling shared global liquidity for Hong Kong exchanges

2026 Legislative Plans​

Hong Kong plans to introduce legislative proposals for virtual asset dealers and custodians in 2026. The new licensing framework under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance will create requirements modeled on existing Type 1 securities rules—meaning crypto dealers will follow the same strict standards as traditional finance.

Consultations on regulating virtual asset advisory and management services closed in January 2026, with implementation expected later in the year.

Side-by-Side Comparison​

The regulatory contrast couldn't be sharper:

DimensionMainland ChinaHong Kong
Crypto TradingBanned (criminal penalties)Legal (licensed exchanges)
MiningBannedNot explicitly prohibited
StablecoinsExplicitly banned (Nov 2025)Regulated (HKMA licensing)
ICOs/Token IssuanceBannedRegulated case-by-case
Retail AccessProhibitedAllowed on licensed platforms
Spot ETFsNot availableApproved (BTC, ETH, SOL)
RWA TokenizationBannedUnder development
Regulatory ApproachProhibition + enforcementRegulation + innovation
CBDCe-CNY (state-controlled)HKD stablecoins (private)
Estimated Users~59 million (underground)Growing (licensed)

Strategic Implications​

For Exchanges and Trading Platforms​

Mainland operations are impossible. Hong Kong offers a legitimate path to serving Chinese-speaking markets, but strict licensing requirements demand significant investment. The passporting potential—reaching global liquidity through Hong Kong licenses—makes compliance economically attractive for serious operators.

For Stablecoin Issuers​

The contrast creates clear routing: Hong Kong welcomes compliant issuers with substantial reserve requirements; mainland China criminalizes the entire category. For projects targeting Greater China, Hong Kong licensing is the only legitimate option.

For Institutional Investors​

Hong Kong's ETF framework and expanding product offerings create regulated access points. The combination of spot ETFs, licensed custody, and traditional finance integration makes Hong Kong increasingly attractive for institutional allocation to digital assets.

For Web3 Builders​

The arbitrage opportunity is geographic. Hong Kong permits innovation within regulatory bounds; mainland China permits blockchain innovation only without tokens. Projects requiring token economics must locate in Hong Kong; pure blockchain infrastructure may find mainland resources and market access valuable.

For the Industry​

Hong Kong's regulatory development represents a proof-of-concept for comprehensive crypto regulation within the Chinese legal tradition. Success could influence other Asian jurisdictions and potentially—though this remains speculative—inform eventual mainland policy evolution.

The Equilibrium Question​

How long can such divergent policies coexist? The "One Country, Two Systems" framework permits significant regulatory divergence, but mainland authorities have historically shown willingness to intervene when Hong Kong policies conflict with national interests.

Several factors suggest the current equilibrium may be stable:

Arguments for stability:

  • Hong Kong's role as international financial center requires regulatory compatibility with global markets
  • Digital asset regulation doesn't threaten core mainland concerns (territorial integrity, political control)
  • Hong Kong serves as a controlled experiment and potential release valve
  • Capital controls remain enforceable through mainland banking systems

Arguments for potential convergence:

  • Mainland enforcement increasingly targets offshore service providers with domestic staff
  • Success in Hong Kong could attract mainland capital through gray channels
  • Political pressure could align Hong Kong more closely with mainland positions

The November 2025 mainland statement extending enforcement to "domestic staff of offshore service providers" suggests authorities are aware of and actively countering regulatory arbitrage.

Conclusion: Navigating the Divide​

The Hong Kong-Mainland divide offers a stark lesson in regulatory philosophy. Mainland China prioritizes capital controls, financial stability, and monetary sovereignty—choosing prohibition as the simplest enforcement mechanism. Hong Kong prioritizes international competitiveness and financial innovation—choosing regulation as the path to managed participation.

For market participants, the practical implications are clear:

  1. Mainland China: Zero legal tolerance for crypto activity. The 59 million estimated users operate entirely outside legal protection.

  2. Hong Kong: Expanding opportunities within a demanding regulatory framework. Licensed operations gain access to both local and global markets.

  3. The border matters: 50 kilometers creates entirely different legal realities. Corporate structuring, staff location, and operational jurisdiction require careful consideration.

As Hong Kong continues building its regulatory infrastructure through 2026 and beyond, it offers an increasingly compelling case study in how jurisdictions can embrace digital assets while maintaining robust investor protections. Whether this experiment influences broader regional or even mainland policy remains to be seen—but for now, the tale of two crypto policies continues to unfold just 50 kilometers apart.

References​

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