International Call for Collaborative Surveillance of Cryptocurrency Transactions Issued by China
In a significant move towards enhancing financial stability, the People's Bank of China has published its 2024 Financial Stability Report, emphasizing the need for regulation in the cryptocurrency market. This call for regulation comes as 51 jurisdictions worldwide have imposed bans or restrictions on cryptocurrency use.
The report highlights that some economies are not only amending existing laws but also introducing new ones to regulate the cryptocurrency sector. This global regulatory trend is particularly noticeable in China, Hong Kong, and major banks like HSBC and Standard Chartered.
China, known for its strict stance on cryptocurrencies, has enforced comprehensive bans on crypto trading and mining activities to curb financial risks and capital flight. This hardline approach is part of China's broader goal to promote its central bank digital currency (CBDC), the digital yuan, while eliminating decentralized crypto use.
Hong Kong, on the other hand, is advancing towards a more progressive and clear regulatory framework. It recently introduced specific stablecoin regulations and broader crypto rules aligned with international standards, such as the EU MiCA framework and U.S. regulations like the GENIUS Act. Hong Kong aims to attract global investors and institutional players by improving compliance standards while fostering innovation.
Major banks like HSBC and Standard Chartered are adapting to this evolving landscape by integrating regulatory compliance into their digital asset strategies. These institutions support regulated, transparent crypto activities and are increasingly involved in tokenized assets, real-world asset (RWA) tokenization, and digital asset custody services that comply with emerging frameworks.
The U.S., through the GENIUS Act, has taken a leading role in this regulatory shift. This first federal legislation focused on stablecoins requires issuers to maintain full reserves and undergo regulatory audits to protect consumers and stabilize the financial system. U.S. regulatory agencies are also revising crypto asset definitions and custody rules to foster innovation under clearer guidelines.
| Region/Entity | Regulatory Approach | |-----------------------|----------------------------------------------------------------------------------------------------------| | China | Strict bans on crypto trading and mining; promotes digital yuan (CBDC) | | Hong Kong | Progressive stablecoin and crypto regulations aiming for global alignment and institutional investor attraction | | Major Banks (HSBC, Standard Chartered) | Compliance-driven adoption of regulated crypto services including custody, tokenized assets | | U.S. (via legislation and agencies) | Comprehensive stablecoin regulation (GENIUS Act), clearer asset definitions and custody rules |
This evolving landscape marks a shift from fragmented, uncertain environments towards clearer, more coordinated frameworks globally. However, challenges remain in international consistency and compliance costs. The People's Bank of China plans to enhance its regulatory framework in alignment with the Financial Stability Board's recommendations.
Additionally, major financial institutions in Hong Kong, such as HSBC and Standard Chartered Bank, are required to incorporate Bitcoin transactions into their standard customer oversight, according to the report. The report also expresses concerns about potential risks that cryptocurrencies might pose in expanding economies where their use in payments and retail investments increases.
Furthermore, the report mentions that Hong Kong is actively exploring crypto licensing, and international coordination on cross-border monitoring of crypto assets is identified as a key priority by the People's Bank of China.
In a surprising turn, Xiao Feng, CEO of HashKey Group, previously suggested that the pro-crypto stance of Donald Trump's administration could influence China to lift restrictions on the digital asset market. However, the current regulatory landscape suggests a more structured and stringent approach to cryptocurrency regulation.
The report indicates that major financial institutions in Hong Kong, such as HSBC and Standard Chartered Bank, are now required to incorporate Bitcoin transactions into their standard customer oversight. This regulatory trend in Hong Kong is part of a broader global effort to regulate the cryptocurrency sector.
With China's recent call for regulation in the cryptocurrency market, its 2024 Financial Stability Report highlights the need for regulation in the business of Bitcoin, emphasizing the importance of technology in shaping these regulations for financial stability, particularly in the context of China's digital currency (CBDC), the digital yuan.
