A professor at the Hong Kong University of Science and Technology (HKUST) has questioned the logic of China’s cryptocurrency mining ban, suggesting that the government should embrace virtual assets amid geopolitical risks.
Completely banning crypto mining in China was “very unwise” as it drove related businesses to the United States, which contributed to US tax income, Wang Yang, vice-president for institutional advancement and chair professor at the Department of Mathematics at HKUST, said during a panel discussion in Hong Kong last week.
China could have directed state-owned enterprises to take up shares in domestic crypto mining firms to control risks such as capital outflows and money laundering, Wang said at the event on June 26, hosted by Hong Kong virtual asset firm HashKey Exchange.
Wang is the latest to question China’s hostile stance towards cryptocurrencies, as Beijing continues its crackdown on the industry on the mainland despite supporting Hong Kong’s efforts to develop the sector.
Hopes that China would open its market to the cryptocurrency industry have grown in recent years as the special administrative region of Hong Kong made moves to build a virtual asset sector. The efforts included licensing crypto exchanges and launching exchange-traded funds that invest directly into cryptocurrency tokens, even though Chinese regulators have given no indication that they would allow the same on the mainland.
After banning initial coin offerings and ordering the closure of exchanges in 2017, the Chinese government went even further by banning bitcoin mining in 2021 and declaring all cryptocurrency-related businesses illegal, saying they disrupted economic and financial order and were a breeding ground for criminal activity.
The potential for Hong Kong to be a gateway for crypto firms to access the sizeable mainland China market was a major theme at a bitcoin industry conference in the city earlier this year.
In an interview with the Post last month, Brock Pierce, co-founder of the largest stablecoin Tether, suggested that China’s opening up to crypto was a matter of “when” and not “if”.
Last week, HKUST’s Wang also floated the idea of tokenisation as an answer for China amid increasing decoupling risks. If former US president Donald Trump retakes office, China could be removed from the Swift financial messaging system or at least face restrictions, Wang said.
“If that’s the case, the market could open up,” Wang said. “I think there will be a breakthrough within three years, when people reconsider what digital assets are, and whether it’s harmful.”