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Journalist
Hassan Shittu
Journalist
Hassan Shittu
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The People’s Bank of China (PBOC) has released its “China Financial Stability Report (2024),” shedding light on the country’s financial stability measures and economic progress over the past year. A significant portion of the report is dedicated to global crypto regulations, with a notable emphasis on Hong Kong’s proactive approach to crypto licensing.
According to the report, In 2023, its GDP exceeded 126 trillion yuan (Approximately $17.79 Trillion), reflecting a 5.2% year-on-year increase.
This growth was primarily driven by strong performance in the technology, export, and renewable energy sectors, which saw significant investment and innovation throughout the year.
The financial system’s stability was highlighted as a crucial factor in achieving economic targets, and measures taken to mitigate risks in sectors such as real estate and banking were thoroughly detailed.
However, the report acknowledges the growing influence of digital assets in the global financial ecosystem and Hong Kong’s role as a testing ground for new crypto policies.
Hong Kong’s Crypto Regulation: Could This Influence China’s Stance On Crypto?
According to an excerpt, one key takeaway from the PBOC’s report is the attention given to Hong Kong’s dual-license system for managing crypto assets.
As China maintains strict control over cryptocurrency activities within the mainland, Hong Kong has introduced structured frameworks to integrate virtual assets into its financial landscape.
However, the evolving nature of crypto markets necessitates continuous regulatory adjustments, which has placed pressure on policymakers to balance innovation with investor protection.
The report elaborates on Hong Kong’s bifurcated approach, which classifies crypto assets into securitized and non-securitized categories governed by distinct legislative frameworks.
Under this system, “security tokens” fall under the jurisdiction of the Securities and Futures Ordinance, while “non-security tokens” are regulated by the Anti-Money Laundering Ordinance.
As the report claims, this dual oversight aims to mitigate risks associated with crypto trading while fostering innovation in the fintech sector.
Additionally, major financial players, including HSBC and Standard Chartered, are mandated to extend their compliance frameworks to crypto exchanges further to align traditional banking practices with emerging digital markets.
The report suggests that Hong Kong’s licensing approach may serve as a blueprint for broader financial reform in China, potentially influencing future policy shifts in the mainland.
Global Crypto Trends and China’s Cautious Approach
The PBOC report also highlights global cryptocurrency trends, particularly emphasizing the increased regulatory scrutiny following market volatility in 2022.
Despite a market rebound in 2023, with the global crypto market capitalization exceeding $3.9 trillion this year, Chinese regulators remain cautious about the systemic risks posed by digital assets.
They cite concerns over potential capital outflows, market manipulation, and the lack of investor protection in decentralized environments.
The report also cites efforts by international bodies, such as the Financial Stability Board (FSB) and the International Monetary Fund (IMF), to establish a unified regulatory framework for cryptocurrencies.
Particularly, China’s central bank stressed the importance of international cooperation in addressing crypto-related risks.
It references the FSB’s July 2023 release of an international regulatory framework for crypto assets.
This framework promotes the principle of “same activities, same risks, same supervision,” advocating for uniform regulatory standards across different markets.
Notably, Hong Kong has recently pledged to implement the Crypto-Asset Reporting Framework (CARF) by 2026 to enhance international tax transparency and address cross-border tax evasion in the crypto sector.
The CARF, introduced by the OECD in 2023, extends the existing Common Reporting Standard (CRS) to cover crypto assets, mandating the automatic exchange of information between jurisdictions.
The first exchange is set for 2028, with reciprocal data-sharing agreements.
