The opportunities and limitations of Hong Kong's crypto market from Guotai Junan's acquisition of Hong Kong's crypto license

In the past two days, the news that domestic securities companies' overseas companies have obtained Hong Kong crypto asset trading licenses has been hyped up in China and Hong Kong, and the high heat has also led to a surge in the stocks of Hong Kong and A-share related companies.

What caused a sensation was that Guotai Junan International, a subsidiary of Cathay Haitong, was officially approved to provide crypto asset trading services in Hong Kong. This is the first company among Chinese securities companies to obtain a license.

Unlike those well-known compliant Chinese-backed exchanges (such as HashKey), this company is a securities company. The securities company's acquisition of an encryption license is an expansion of the original business, which increases the imagination of the business; in addition, the name "Guotai Junan" easily makes people think that behind this news, does it mean that mainland China has begun to loosen up in some aspects?

My view on this is still cautious.

Whether it is the previous hype about stablecoin-related companies or the hype about this news, in my opinion, it is more about the release of optimism and the raising of expectations for the future.

People are optimistic and expect that Hong Kong, based on its status as a world free port, can occupy a place in the global crypto ecosystem and attract global participants.

If Hong Kong wants to compete in the global crypto ecosystem, its direct opponent is the United States. The United States is now superior to Hong Kong in terms of both regulation and user volume.

In terms of regulation, the regulatory policies of the United States are obviously much more relaxed than those of Hong Kong, and the infrastructure of the crypto ecosystem is also much better.

In terms of user volume, domestic users in the United States are enough to support application scenarios with enough imagination, while Hong Kong is definitely not relying on the local user volume.

Under such circumstances, Hong Kong can only work hard to attract potential users - I think this is the basis of the above optimism and expectations.

And the core projection group of this optimism and expectation is the Chinese mainland with a population of 1.4 billion.

However, the constraints of the Chinese mainland in foreign exchange control make it difficult to truly release the expected dividends.

A few days ago, direct cross-border transfers between banks in the mainland and Hong Kong were opened in China. This was hyped by many media as "loosening" of control. In fact, this is just an improvement in transfer efficiency and a reduction in costs, and the amount of cross-border transfers has not changed.

In the past two years, mainland residents could apply for an account offline at HSBC and get a Hong Kong card on the same day, but now offline applications have been stopped. It seems that only online applications are possible and it is impossible to get a Hong Kong card on the same day.

From these details, it can be seen that foreign exchange controls have not been relaxed.

In addition, crypto transactions in Hong Kong have always been very strict, and the review of the identity of account holders has not been relaxed.

For example, HashKey, the most well-known compliant exchange, has only allowed Hong Kong residents, permanent residents and mainland residents with legal status overseas to apply for accounts.

For another example, even if mainland residents apply for a Hong Kong card and use the asset trading services provided by Hong Kong banks, there are strict restrictions on the trading of encrypted assets.

There is no sign of loosening in this regard, and I don't think it will be loosened in the future.

Without changes in foreign exchange controls and identity verification, the 1.4 billion people in the mainland are just "moons in the water and flowers in the mirror", which are out of reach.

Of course, this does not mean that these policies in Hong Kong are useless. They are definitely useful and can definitely help the business expansion and extension of relevant financial institutions. But there is a big gap between this role and effect and the role and effect that can be thoroughly stimulated in imagination. This gap always makes people feel regretful.

In addition, when I see countries on the other side of the world running wildly on this track, while the free port right in front of me always feels constrained, I always feel inexplicably upset.