Opinion by: Joshua Chu, co-chair of the Hong Kong Web3 Association
Last week announcement Hong Kong 2.0 Digital Assets Policy Statement of Digital Assets is made with a lot of hope and adventure. The Hong Kong government has promised a comprehensive regulatory framework to unite licensing and “expand the suite of tokenised products.”
But under the hype and visible maneuvers lies a more consequence of the move: Beijing’s (The second largest crypto holder in the world) It is an announcement of its liquid that the confiscated virtual currency through Hong Kong’s licensed exchanges. These events, while apparently separate, are actually the ingredients of a careful orchestra China’s approach, designed to position Hong Kong as the dominant virtual asset hub and strategic China market operator.
A convergence approach: Hong Kong has prepared to become the region’s virtual asset hub. However, it will also serve as Linchpin of China’s global ambition: a crypto hedge, a market price vehicle and a forward command for PRC-Crypto-liquid.
Regulations foundations
On the surface, the Hong Kong jump policy will appear all titles. A valid understanding of the approach, however, is demanded looking across the surface. The true power of this policy decisions lies in the injection of liquidity that China’s crypto-liquid decision will always be created. This instrument will be at the same time that Hong Kong’s influence has not yet occurred in the global virtual asset market.
Hong Kong regulation foundation can be traced back to 2022 along with the passage of anti-money laundering and counter-terrorist financing ordinance (AMLO) amendments, which, after the Securities and Futures Commission had the opportunity to gain sufficient experience under the previous opt-in regime, formally carrying virtually virtuals of the trading platforms (VATPS) under their solitude by motivating regular license registrations. This critical step is a safe alignment with the Financial Action Task Force (FATF) Standards and it became the first law of the foundation for virtual ownership.
The next critical law that occurred was the Stablecoin ordinance, which was set to begin on August 1, 2025, which established a dedicated licensing regime for those who provided Fiat Stablecoin. The Hong Kong Financial Authority (HKMA) oversees this regime, mandating one-to-one reserve, stable redemption mechanism and strict risk controls.
In June 2025, the introduction of the Digital Digital Assets 2.0 policy statement further developed the Hong Kong framework. LEAP combines licensing, expands the suite of tokenized products and advancing that uses cases of cross-sector cooperation and talent development. Beyond Fatf directed by the regulation of tinkering.
Only laws and regulations cannot, however, the command markets. It is liquidity that will decide the sun.
China’s decision to vacation has confiscated digital assets through Hong Kong’s licensed VATP will be strategically deprived of real, tangible liquidity in the ecosystem. This is no longer an exercise on FATF compliance list – this is a strategic lever. By enabling controlled extermination, Hong Kong stands to become a market price market capable of rapid modulate supply and demand, another major factor in driving virtual amounts of property.
Liquidity as a weapon
Milk is the life of any market. Without liquidity, even the most popular market would be confusing. Just look at the London Stock Exchange.
Related: Which countries are secretly owned by the most bitcoin – beyond the US and China
Under China’s great approach, unlike the United States, holding a widely strategic Bitcoin reserves and placed under a strict “hold-only” policy, the liquidity injured in Hong Kong exchanges will actively convert the seized liquidity properties to the market. This setup will give Hong Kong – and through China’s extension – the ability to influence prices, stabilize markets and respond to geopolitical pressure that it sees.
Just as the control of rare metal metal has provided China with all the cards in the latest trading negotiations in the US, as well as control crypto liquidity, which effectively controls the cost of the new US crypto reserve.
It is a gentle, but deep, move to the balance of power. The ability of a single country to control the flow of liquidity is to control the narratives and outcomes in the market.
Implications and countermeasures
This good approach is the introduction that changes the balance of power within the cryptosphere. Hong Kong will have a decisive advantage over the absorption of institutional capital and deepening of the market in the market, using its unique position as the conduit for moving PRC crypto.
At the same time, by scaling “Hong Kong in the new heights of the global leadership of the digital asset,” China will have a powerful geopolitical tool in its hands, which will control global cryptocurrency values by calculating the management of the market.
Meanwhile, the US will face a strategic dilemma: should it continue with a passive crypto stockpile with limited or without influence on the market? Or should the US consider new mechanisms to count Hong Kong’s growing control over crypto liquidity?
Understanding the ever -changing -new in this interplay is important for market participants, lawyers, practical risks and lawmakers. After all, compliance with frameworks should be adjusted to meet increasing investigation and risks associated with the movements of the liquidity market. In contrast, risk management techniques expect volatility that comes from the strategic flow of liquidity and an enthusiastic understanding of how liquidity control will shape the narratives and outcomes of the market are key.
The key to web3 markets is therefore liquidity and information. While Hong Kong’s leaping policy draws attention to all media, the real chess transfer lies in China’s destruction and injection policy. This injection will make Hong Kong in a dynamic market price vehicle, with the ability to use liquidity as a weapon that may match some constituents.
It compares to the US, which is forced by a strict “hold-only” policy, and it lacks flexibility to influence market liquidity or respond to price volatility.
Singapore, who, despite a mature regulatory framework, faces limitations on the market scale, and Dubai, even aspiring, struggle with fragments of regulatory remit and high operating costs that prevent rapid scale. Hong Kong is “holding all the cards.” At this time, China also does all the liquidity cards.
As such, the city’s unique combination of mature regulation frameworks, direct access to the world’s second largest largest crypto hold and the ability to deploy such liquidity strategic in their decision making it a unmatched high place in the web3 ecosystem. Hong Kong can change the global crypto prices in real time, attract institutional capital and promote change within a stable, investor environment.
Milk is the final action in this contest, and Hong Kong is holding a switch. Understanding this layered approach is important for those who seek to navigate the rapid emerging digital asset landscape with clarity and perspective. Those who have failed will find themselves outmaneubered.
Opinion by: Joshua Chu, co-chair of the Hong Kong Web3 Association.
This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.
