The 2023 Hong Kong Web3 Festival, co-hosted by Wanxiang Blockchain Lab and HashKey Group, marked a pivotal moment for the Web3 ecosystem in Asia. Among the standout sessions was the “0xU Youth Pioneer Special,” where Professor Zhao Binghao—renowned expert in fintech law and Dean of the Institute of Fintech and Legal Innovation at China University of Political Science and Law—delivered a compelling keynote titled Laying the Legal Foundations for Trustworthy Cross-Jurisdictional Web3 Applications.
This article explores the second part of his speech: "Rebuilding Web3 Confidence: Hong Kong and Mainland China – Distant Yet Converging Paths." Drawing on legal frameworks, regulatory evolution, and cross-border cooperation, we unpack how two distinct jurisdictions are shaping the future of digital assets—each on its own path, yet moving toward a shared vision.
The Regulatory Evolution: Hong Kong vs. Mainland China
Hong Kong’s Four-Stage Regulatory Framework
Hong Kong has adopted a structured, progressive approach to virtual asset regulation—what can be described as a four-phase journey: behavior → organization → platform → industry.
- Behavioral Regulation (2017)
In September 2017, the Securities and Futures Commission (SFC) issued a statement on Initial Coin Offerings (ICOs), distinguishing between tokenized securities (regulated) and non-security digital assets (unregulated). This marked the first formal regulatory stance on blockchain-based fundraising. - Organizational Oversight (2018)
By November 2018, the SFC expanded its scope to cover fund managers and distributors dealing with virtual asset portfolios. It introduced a “sandbox licensing” model, allowing firms to operate under close supervision while refining compliance standards. Platform Regulation (2019–2023)
Starting in 2019, Hong Kong began regulating crypto trading platforms:- 2019: The SFC published its Position Paper on Regulating Virtual Asset Trading Platforms, applying modified brokerage standards to platforms offering security token trading.
- 2020: The Financial Services and Treasury Bureau proposed legislation defining Virtual Asset Service Providers (VASPs), subjecting them to anti-money laundering (AML) requirements.
- 2023: A new licensing regime took effect on June 1, requiring all centralized exchanges operating in or targeting Hong Kong investors to obtain SFC approval—regardless of whether they offer security tokens.
Industry-Level Governance (2023 Onward)
In February 2023, the SFC released a consultation paper outlining enhanced rules for licensed platforms, including:- Dual licensing (SFC + AML compliance)
- Risk management protocols
- Retail investor access under strict safeguards
This shift signals Hong Kong’s ambition to become a global hub for compliant Web3 innovation.
👉 Discover how compliant crypto platforms are shaping the future of finance.
Mainland China’s Regulatory Trajectory: From Caution to Prohibition
In contrast, Mainland China’s approach follows a different rhythm: awareness → classification → tightening → suppression.
- 2013: The People’s Bank of China (PBOC) declared Bitcoin a “virtual commodity,” acknowledging its existence without endorsing it.
- 2017: The infamous “9.4 Notice” banned ICOs and prohibited exchanges from facilitating fiat-crypto conversions.
2021: Two major directives intensified restrictions:
- Mining operations were outlawed due to energy concerns.
- Crypto trading and related services were labeled “illegal financial activities” in the “9.24 Notice.”
Despite this strict stance, these policies reflect not rejection—but strategic caution. The focus remains on financial stability, monetary sovereignty, and preventing capital flight.
Four Points of Convergence: Toward a Shared Future
While regulatory styles differ, Hong Kong and Mainland China are increasingly aligned in purpose. Here’s why their paths may diverge today—but converge tomorrow.
1. Stablecoins and Central Bank Digital Currency (CBDC)
The PBOC pioneered research into central bank digital currencies (CBDCs), launching the Digital Yuan (e-CNY) pilot years ago. Notably, it aims to integrate e-CNY with Hong Kong’s Faster Payment System (“FPS”) for cross-border transactions.
Meanwhile, Hong Kong’s emerging stablecoin projects—like Round Dollar (RDO)—offer multi-currency payment solutions across RMB, USD, and HKD. Rather than competing, these initiatives complement the digital yuan by facilitating offshore RMB liquidity and international use.
This synergy suggests a future where regulated private stablecoins coexist with sovereign digital currencies—under coordinated oversight.
2. NFTs: Controlled Innovation vs. Open Markets
In Mainland China, NFTs are rebranded as “digital collectibles” and tightly controlled:
- Must reside on permissioned chains
- No secondary market trading allowed
- Purchase limited to legal tender
Yet in Hong Kong, NFTs that don’t qualify as securities fall outside regulated activities—opening doors for creative and commercial applications.
As uncertainty grows in the Mainland, many digital collectible platforms are relocating to Hong Kong to access clearer regulations and global markets. This migration isn’t an escape—it’s a strategic pivot toward sustainable innovation within a trusted legal framework.
👉 See how NFT creators are thriving in compliant ecosystems.
3. Cross-Border Legal Cooperation: Precedents Matter
The “One Country, Two Systems” principle enables legal pluralism between Mainland China and Hong Kong. Over nine judicial assistance agreements have been signed since 1997, covering civil and commercial judgments.
A landmark development occurred in late 2022 with the passage of the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance, streamlining enforcement of court decisions across borders.
This matters for Web3: if a crypto dispute arises in Hong Kong under its pro-innovation laws, will Mainland courts respect that ruling?
The answer may lie in the Song Kai v. Li Shilong case (2016). The Supreme People’s Court ruled that gambling debts incurred in Macau should be assessed under Macau law—not mainland prohibitions—because no public policy override applied.
By extension, if a Web3 platform is legally licensed in Hong Kong, its contracts could gain recognition in Mainland courts—provided they don’t violate core public interests.
4. Shared Vision for Financial Stability and Technological Leadership
Both regions recognize that virtual assets aren’t just speculative tools—they’re part of a broader digital transformation affecting monetary policy, financial infrastructure, and national competitiveness.
Hong Kong embraces DeFi under the “same risk, same rules” principle: decentralized platforms offering securities-like products must comply with SFC regulations.
Mainland policymakers, while cautious, acknowledge blockchain’s strategic value. As economist Huang Yiping noted: Banning crypto trading may serve short-term stability but risks long-term technological irrelevance.
The solution? A balanced approach—one that fosters innovation without compromising systemic safety.
👉 Learn how global regulators are adapting to decentralized finance.
Frequently Asked Questions (FAQ)
Q: Can Mainland Chinese investors legally use Hong Kong crypto exchanges?
A: While direct access is restricted under Mainland rules, Hong Kong-licensed platforms serving international users—including Chinese nationals abroad—are compliant. Many investors use these services via offshore entities or personal travel.
Q: Is Hong Kong becoming a safe haven for Web3 startups from Mainland China?
A: Yes. Over 80 virtual asset firms have submitted intent letters to establish operations in Hong Kong as of early 2023. With clear licensing rules and strong legal protections, it’s emerging as a preferred gateway for compliant innovation.
Q: Will Mainland China ever allow crypto trading again?
A: A full reversal is unlikely soon. However, pilot programs linked to CBDCs or regulated digital asset zones (e.g., Hainan) may introduce limited exposure under strict controls.
Q: How do stablecoins like Round Dollar interact with China’s capital controls?
A: Projects like RDO operate within Hong Kong law and do not bypass Mainland regulations. Their value lies in facilitating cross-border payments—not evading controls—making them compatible with China’s financial governance model.
Q: What does “same risk, same method” mean for DeFi platforms?
A: If a DeFi protocol offers products equivalent to securities or derivatives, it must meet the same regulatory standards as traditional financial institutions—including licensing, disclosure, and investor protection measures.
Q: Could Hong Kong’s regulatory model influence future Mainland policies?
A: Historically, Hong Kong has served as a testing ground for financial reforms (e.g., stock connect programs). Its Web3 framework could inform future Mainland approaches—especially regarding institutional investment and regulated digital asset markets.
Final Thoughts: Distant Now, United in Purpose
Two decades ago, Hong Kong’s stock exchange paved the way for Shanghai’s financial rise. Today, history may repeat itself in the Web3 era.
Hong Kong’s progressive yet prudent regulation is restoring confidence among developers, investors, and institutions. Meanwhile, Mainland China continues building foundational technologies—like blockchain infrastructure and CBDCs—behind closed doors.
Though their methods differ, both aim for financial modernization, technological sovereignty, and global relevance.
As Professor Zhao concluded: “Hong Kong is the bridgehead of reform; the Mainland is the engine of growth.”
Together, they’re not drifting apart—they’re building a dual-track system where innovation thrives under trust, and trust is anchored in law.
The journey has just begun.
Core Keywords: Web3 regulation, Hong Kong crypto laws, Mainland China blockchain policy, virtual asset compliance, stablecoin development, cross-border fintech, NFT legal framework, SFC licensing