Hong Kong Aims to Be the Global Conduit for Crypto and AI

Hong Kong is deliberately crafting a role as a linking node between established finance, mainland manufacturing hubs, and international crypto markets rather than seeking to outcompete other centers. A prominent legislator active in tech policy has driven recent moves: framing stablecoin rules, supporting exchange licensing, and advocating for custody and over-the-counter regulations to follow. Those measures are intended to create predictable on-ramps for institutional and professional activity, including possible higher-volume trading avenues for qualified participants. The strategy rests on specific comparative advantages: common-law judicial frameworks, English-language legal processes, open capital flows, and a dense cluster of global banks and professional services. Coupled with Shenzhen and other mainland cities’ engineering depth, Hong Kong’s value proposition is to match legal and capital scaffolding with rapid product development nearby. The approach intentionally treats crypto as a cross-jurisdictional ecosystem that benefits from harmonized standards rather than fractured national regimes. That posture also informs outreach to global players that have faced enforcement pressure elsewhere, positioning the city as an alternative venue for regulated operations. Looking ahead, the planned custody and OTC rules will test whether regulators can translate policy intent into operational certainty for custodians, market makers, and institutional counterparties. Regulators are also implementing international tax-transparency measures (driven by frameworks like the OECD’s Crypto-Asset Reporting Framework), and industry groups have begun to press Hong Kong to temper enforcement mechanics that could unduly burden providers. The Hong Kong Securities & Futures Professionals Association, for example, has urged ceilings on fines, safe-harbour language for directors who make reasonable compliance efforts, tighter data-privacy protections, and a mechanism to transfer record-keeping obligations to regulated service providers if an operator exits the market. Those implementation details matter: heavy-handed penalty regimes, uncapped per-account fines, or onerous reporting flows could push smaller or newer providers out of the market and undermine the city’s hub ambitions. Equally consequential is the city’s pitch as an AI collaboration hub that can mediate access to both Western and Chinese datasets, a claim that will hinge on data governance, privacy regimes and commercial partnerships. The broader risk calculus includes geopolitical friction, divergent enforcement philosophies across major markets, and the need to avoid regulatory arbitrage that could attract bad actors. If Hong Kong can sustain clear, predictable processes—including proportionate reporting rules and effective oversight—it could accelerate the migration of crypto infrastructure toward regulated markets; if it cannot, credibility and capital may flow elsewhere.