The Chinese cryptocurrency industry embraces new opportunities amid open policy

On January 22nd, five departments, including the People’s Bank of China, officially announced a cross-border financial opening policy targeting the Guangdong-Hong Kong-Macao-Taiwan region. This is seen as more than just a simple financial policy; it signals a new opening for the Chinese cryptocurrency industry and opens the door to new possibilities. So, what practical changes will this policy bring to the cryptocurrency industry?

Key Focus of Financial Opening: Three Policy Directions

This opening policy includes a total of 20 detailed measures, among which the core elements directly related to the cryptocurrency industry can be summarized into three main points.

First, expanding cross-border asset management channels. According to the policy, residents of the Guangdong-Hong Kong-Macao-Taiwan region will have an expanded scope to purchase qualified investment products through financial institutions in Hong Kong and Macao. Currently, qualified products mainly include Hong Kong stock funds, overseas bonds, and other traditional financial products. However, with the Hong Kong government actively considering launching virtual asset ETFs, there is potential for cryptocurrency-related products to be included in the future.

Second, standardizing cross-border flow of financial data. The policy specifies the establishment of security management systems for cross-border data transmission by financial institutions, which provides an opportunity for blockchain technology’s transparency and security features to meet regulatory requirements.

Third, allowing new services from overseas financial institutions. According to the policy document, foreign financial institutions can provide new financial services in the same manner as Chinese financial institutions, with approvals to be completed within 120 days. Notably, enabling free remittance for foreign investors under genuine compliance opens new possibilities for international financial cooperation.

Three Opportunities for the Cryptocurrency Industry

Stage 1: Entry through Virtual Asset ETFs

Hong Kong introduced the Virtual Asset Service Provider(VASP) system in 2023, establishing a legal basis for cryptocurrency asset trading platforms within compliance frameworks. Based on this foundation, if virtual asset ETFs are incorporated into the cross-border asset management plans, mainland Chinese individual investors could gain access to cryptocurrency assets through legitimate channels for the first time. This would be a revolutionary change that is hard to imagine under the current strict regulatory environment.

Stage 2: Blockchain-based Cross-Border Payments

Cross-border payments have long been a focus of blockchain applications. Existing international remittance systems like SWIFT and CHIPS involve multiple intermediaries and complex procedures, whereas blockchain-based payments can significantly shorten these steps. As the new policy standardizes financial data flows and recognizes blockchain’s transparency and security, a conducive environment is emerging for blockchain technology to be applied in everything from small personal remittances to large-scale trade finance.

Stage 3: New Funding Structures via RWA

RWA( (Real-World Asset) tokenization involves digitizing and fragmenting traditional financial assets such as real estate, stocks, and bonds on blockchain. Many Chinese companies currently face high costs and complex intermediaries in fundraising, but RWA can fundamentally change this process.

With the policy allowing foreign financial institutions to participate and enabling free remittance for international investors, domestic companies can directly engage with overseas investors without going through traditional intermediaries. This can drastically shorten fundraising periods and reduce costs. Moreover, since asset information on the blockchain is publicly available in real-time, investors can assess risks based on on-chain data, ultimately reducing information asymmetry and lowering companies’ funding costs.

Practical Challenges: Three Major Obstacles

However, opening up does not necessarily mean rapid industry growth. The cryptocurrency industry still faces significant practical challenges.

) Challenge 1: Tension Between Regulatory Relaxation and Compliance Pressure

China’s mainland cryptocurrency regulations have remained strict since the 2017 ICO###Initial Coin Offering( ban. Although the new policy expands cross-border asset management and permits certain overseas financial services, in reality, the permitted investment channels are still limited to traditional financial products. Whether virtual assets will be included in the policy pilot remains uncertain and depends on the dynamic regulatory game. Hong Kong has established an international-level regulatory framework, but how quickly this will extend into the mainland market is unclear.

) Challenge 2: Integration of Technology and Existing Financial Systems

Even if blockchain is known for transparency and efficiency, integrating it into existing financial systems presents other issues. For example, legal definitions are still unclear on whether tokenized assets can be recognized as equivalent to the original assets under current legal frameworks. Additionally, how cross-border capital flows will meet complex international regulatory requirements and how to coordinate across multiple jurisdictions are major current challenges. Ensuring data trustworthiness and integrity during on-chain asset processes also remains an evolving technical standard.

( Challenge 3: Market Education and Building Investor Trust

The cryptocurrency industry has long been controversial due to price volatility and lack of transparency. Even if policies open the door for certain crypto products to enter cross-border asset management plans, market growth may be limited if general investors have low understanding and acceptance. Although virtual asset ETFs have been launched in various markets worldwide, investor concerns about volatility persist even in mature markets. The complexity of technology and high risks make it difficult for many individual investors to effectively assess risks. Therefore, how financial institutions will educate investors and disclose information to build market trust will be crucial for future development.

Outlook: The Future of China’s Cryptocurrency Industry

The opening policy clearly presents new opportunities for China’s cryptocurrency industry. However, for industry activation, balancing regulation and innovation is essential.

Industry participants should first accelerate technological implementation within the policy framework, maximizing blockchain’s advantages while meeting regulatory requirements. Second, they should concretize cooperation models with traditional financial institutions. Innovative products like RWA can only be realized within the existing financial system. Third, greater focus should be placed on market education. Transparent information disclosure and investor education are key to building long-term trust.

In conclusion, China’s recent financial opening policy may not lead to short-term rapid surges, but it signals an important long-term direction for the Chinese cryptocurrency industry. If compliance and transparency are built on a foundation of technological innovation, China’s crypto industry is likely to find a more mature and sustainable growth path.