Institutions are shrinking their cryptocurrency operations in Hong Kong to avoid systemic and dependency risks that may arise from being tied to USD stablecoins

ChainCatcher news, various institutions are required to scale back their cryptocurrency business in Hong Kong. Internet platforms, Chinese-funded brokerages, Chinese banks, and other institutions in Hong Kong have been asked to suspend all types of business related to cryptocurrency assets, including investment, trading, issuance of RWA, stablecoins, and more.

Among them, brokerages that have obtained the qualification to "provide virtual asset trading services" are particularly focused on, as clients can directly trade Bitcoin, Ethereum, Tether, and others in their accounts. From the perspective of asset substance, Hong Kong categorizes virtual assets into securities-type virtual assets and non-securities-type virtual assets. For Chinese-funded enterprises engaged in virtual currency-related businesses, such as investing in virtual currencies, issuing RWA for domestic assets overseas, providing virtual currency trading services, and issuing stablecoins, there are varying degrees of restrictions.

It is understood that the fundamental reason for restricting different types of institutions from investing in and trading virtual currencies is to avoid systemic risks and dependency risks that may arise after domestic enterprises are bound to dollar-pegged stablecoins and unanchored virtual currency systems.

It is reported that the "financial and treasury company" model will be restricted. In this wave of cryptocurrency innovation, the model of leveraging investments in cryptocurrency assets through the "financial and treasury company" model has been rapidly replicated. Many Chinese-funded enterprises listed on Hong Kong and U.S. stock markets have announced the purchase of Bitcoin, Ethereum, and other cryptocurrency assets, hoping to profit from both stock prices and coin prices. Now, this model is likely to be restricted.