The inside story of various institutions reducing their cryptocurrency business in Hong Kong, avoiding the systemic and dependency risks that may arise from being tied to USD stablecoins

ChainCatcher news, according to Caixin reports, various institutions have been asked to scale back their cryptocurrency business in Hong Kong. Internet platforms, Chinese-funded brokerages, and Chinese banks in Hong Kong have all been requested to suspend various activities 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" have become key focus areas, as clients can directly trade Bitcoin, Ethereum, Tether, and other cryptocurrencies 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 enterprises engaged in virtual currency-related businesses, such as investing in virtual currencies, issuing RWA from domestic assets to 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 warehouse company" model will be restricted. In this wave of cryptocurrency innovation, the model of leveraging investments in cryptocurrency assets through the "financial warehouse company" model has been rapidly replicated. Many Chinese enterprises listed on Hong Kong and U.S. stock markets have announced purchases of Bitcoin, Ethereum, and other cryptocurrency assets, hoping to profit from both stock prices and cryptocurrency prices. Now, this model is likely to be restricted.