Despite a crypto ban, China leads global Bitcoin mining, while regulatory changes loom. Hong Kong is emerging as a key player in stablecoin adoption and crypto innovation.
China’s Unexpected Bitcoin Mining Dominance Despite Crypto Ban
Despite the Chinese government’s ban on cryptocurrencies in 2021, China remains a dominant player in the global Bitcoin mining industry. Even though mining operations were supposed to be shut down, Chinese miners still control over 55% of the global Bitcoin hashrate. This figure was recently confirmed by Ki Young Ju, CEO of CryptoQuant, who highlighted the influence of Chinese mining pools on the global Bitcoin network.
In comparison, U.S. mining firms now manage around 40% of the network, with American institutional miners relying heavily on these U.S.-based pools. However, Chinese pools, though operating under a regulatory ban, continue to support smaller, decentralized miners across Asia. This resilience is particularly surprising given that China’s ban was aimed at eliminating Bitcoin mining entirely.
China’s 2025 AML Regulations and Potential Crypto Policy Changes
China’s approach to cryptocurrencies may undergo a significant transformation by 2025. The country plans to amend its Anti-Money Laundering (AML) regulations to address cryptocurrency transactions more comprehensively. Current discussions among scholars and financial experts indicate that the new framework will provide stricter guidelines for monitoring crypto-related activities.
Although China initially imposed a strict ban on cryptocurrency use in 2021, technological advancements and the decentralized nature of digital assets have enabled mainland users to continue accessing crypto markets. As a result, concerns about money laundering have risen, pushing for more stringent oversight in the revised regulations.
Furthermore, there are rumors that China might consider lifting its ban on Bitcoin by late 2024. Industry leaders, including Mike Novogratz, CEO of Galaxy Digital, have hinted at the possibility of China softening its stance toward cryptocurrencies, potentially reigniting the crypto market within the country.
Bitcoin Mining Revenues Under Pressure
In addition to regulatory challenges, Bitcoin miners have been struggling with declining revenues. In August 2024, miners around the world faced their lowest monthly earnings in a year, generating just $827.56 million. This marked a drop of over 10.5% from July’s $927.35 million.
Though Bitcoin’s price hovered around $25,000 during August, the overall number of mined Bitcoins decreased, from 14,725 BTC in July to 13,843 BTC in August. This revenue downturn signals growing challenges for miners, who must navigate the volatile price of Bitcoin, rising energy costs, and increasing competition.
Hong Kong’s e-HKD Project Expands Into Tokenization and Programmability
The Hong Kong Monetary Authority (HKMA) has been advancing its digital currency initiative with the e-HKD project, which recently entered its second phase. Renamed “Project e-HKD+,” this new phase explores the tokenization of assets, programmability, and offline payments, with a broad range of 21 financial institutions participating.
The focus of Project e-HKD+ extends beyond traditional digital currency development. Several participants, such as Hang Seng Bank and Aptos Lab, are examining how digital money can be used for tokenized fund settlements on public blockchains. Other institutions, including Visa and China Mobile, are exploring ways to leverage the e-HKD for cross-border payments and offline transactions using mobile SIM cards.
The HKMA’s move to embrace such wide-ranging use cases reflects its ambition to not only introduce a central bank digital currency (CBDC) but also build a robust infrastructure for future digital asset development in Hong Kong. This also aligns with the city’s broader vision of becoming a global cryptocurrency hub.
The Rise of Stablecoins in Eastern Asia and Their Impact on Fiat Currencies
In 2024, stablecoins have gained considerable traction across Eastern Asia, driven by economic challenges like inflation and currency devaluation. Hong Kong, in particular, has seen rapid adoption of stablecoins, which now account for 40% of the region’s total crypto value. According to a report by Chainalysis, stablecoins and other cryptocurrencies are gradually replacing fiat currencies in some countries, offering lower fees and faster cross-border transactions.
The growing reliance on stablecoins is notable in emerging economies, where access to traditional banking services can be limited, and remittance costs remain high. This shift toward stablecoins presents both opportunities and challenges, as central banks in the region may intensify their regulatory oversight to protect the dominance of fiat currencies.
One example of this growing regulatory scrutiny is Hong Kong’s recent proposal for a new stablecoin licensing regime. The aim is to regulate fiat-backed stablecoin issuers, a move that underscores the increasing importance of stablecoins in the region’s financial landscape.
Hong Kong’s Crypto Hub Aspirations
Hong Kong is making significant progress toward becoming a global cryptocurrency hub, with increased digital asset activity across the region. The city has seen an impressive 85.6% growth in crypto adoption, making it the fastest-growing crypto market in Eastern Asia.
The rise of stablecoins has been a crucial driver of this growth, accounting for a substantial portion of the region’s total crypto value. However, with this increased adoption comes heightened regulatory scrutiny. Authorities are expected to continue tightening regulations around digital currencies to mitigate risks such as fraud and money laundering.
At the same time, Hong Kong’s government has been supportive of innovation in the crypto sector. In 2024, the HKMA launched several initiatives, including a sandbox for exploring artificial intelligence (AI) applications in finance and a forum for discussing potential digital asset regulations. These efforts highlight the city’s determination to establish itself as a leader in the global cryptocurrency space.
