China’s crypto ban has been in place since 2021, but that hasn’t stopped companies from chasing what they believe are ways to reenter.
Hyped-up stablecoin announcements in Hong Kong and overseas listings that hint at digital assets are just some of the ways companies are testing boundaries. Each time, Beijing responds with fresh warnings — a stark reminder that China’s crypto U-turn isn’t around the corner.
Hong Kong’s RWA and stablecoin activity picked up as new licensing rules took effect. (Anndy Lian)The latest warning reportedly came from the China Securities Regulatory Commission, which advised companies to pause real-world asset ventures in Hong Kong. It followed a state-owned company scrubbing announcements about tokenizing bonds and other enterprises revealing RWA projects, piling on recent warnings against stablecoins after Hong Kong introduced its licensing framework.
To understand why these illusions of loopholes keep appearing — and why they collapse — Magazine spoke with Joshua Chu, co-chair of the Hong Kong Web3 association.
This conversation has been edited for clarity and length.
Magazine: Crypto has been banned for years in China, so why do regulators keep issuing fresh warnings?
Countless social media accounts predicted Beijing would reverse its crypto ban, but it hasn’t moved so far. (DeFiMadara)Chu: The challenge is that many new lawyers in Hong Kong moving into Web3 don’t have much experience with cross-border issues. That’s created fragmentation and a lot of confusion. Some journalists and lawyers even claimed there was a 180-degree reversal on crypto policy. China doesn’t do 180-degree turns in policy. The only U-turn in recent memory was the rollback of COVID-19 mandates.
The crypto ban from 2021 is a good example: Speculative assets are not meant for the retail sector. The People’s Republic of China is still a communist country, and if an unsophisticated investor loses money gambling on crypto, in the government’s view, that’s losing money for the state. That’s why the only entities we’ve seen handling crypto assets are the government or state-owned enterprises.
Magazine: How do you explain this cycle where Chinese firms repeatedly attempt to enter a trendy crypto venture through Hong Kong, only for mainland regulators to push back?
Chu: The issue is how they’re doing it. Even big companies with money can act in a less-than-sophisticated way. There’s a difference between state-owned enterprises and private institutions. The government is comfortable with blockchain infrastructure and foreign direct investment. What it won’t tolerate is speculation because speculation equals bubbles.
That’s why regulators crack down on projects designed to hype markets or pull value from retail investors. It’s the same logic behind China’s real estate policy: Buying to live in is fine, but speculation isn’t. You can think of it as a parental style of governance: Just as parents wouldn’t let children gamble with family savings, the state won’t let retail investors gamble away wealth in crypto.
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At the end of the day, companies see profit potential, which is why they want in. But regulators will only support ventures that are sophisticated, compliant and responsible. That’s also why Hong Kong can hold itself out as one of the world’s top three financial hubs — its reputation depends on keeping the system clean, and the same principle applies to virtual assets.
Hong Kong aims to strengthen its financial center rating through cryptocurrencies. (Long Finance)Magazine: Isn’t the real problem that Chinese firms are hunting for loopholes and Hong Kong lawyers aren’t equipped to stop them?
Chu: Unfortunately, that happens a lot. If your whole business is founded on loopholes, you’re already on shaky ground. Regulators don’t create loopholes for you to exploit; they expect you to build something sustainable and compliant.
But because of the 2021 crypto ban, you have an entire market that’s been shut out. Human psychology kicks in, and people think: “Maybe this is my way back in.” That’s why you see companies making loud announcements before they’ve even filed an application. Take the stablecoin regime: Some firms were hyping plans to apply for licenses just to pump their stock price. Naturally, regulators step in.
China’s 2021 crypto ban defines crypto-related businesses as illegal financial activities. (China State Administration of Foreign Exchange)We’ve seen this pattern before. When initial coin offerings were being sold as a cheaper alternative to initial public offerings, companies said you didn’t need a prospectus or compliance. But there’s a reason those safeguards exist: to protect investors. So, when players start cutting corners and shouting about it, it draws scrutiny. And that’s when clampdowns happen.
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Magazine: When Chinese firms listed in Hong Kong or the US gain crypto exposure, is this regulatory arbitrage?
Chu: When a Chinese company lists on Nasdaq, it’s absorbing foreign investment, which triggers a different response than if it were raising funds domestically. The real question is how they structure these RWA or tokenization projects.
If they’re putting Chinese corporate data on a public blockchain, that creates cross-border data transfer issues. Remember, even listed companies have run into problems with US auditors because of China’s strict rules on what information can leave the country. Blockchain raises those concerns all over again.
Media outlets recently reported that a state-owned enterprise launched RWA bonds on Ethereum, but the announcement was quickly deleted. (WeChat)There’s also the financial side. Many of these treasury strategies look risky, especially when driven by institutional FOMO at the peak of a bull cycle. Without strong internal risk controls, volatility can overwhelm the market cap of these firms. That’s exactly the kind of contagion risk regulators want to avoid.
If that happens, the scrutiny won’t just come from Beijing; it will come from the SEC as well.
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