Hong Kong's Crypto Ambitions at Odds with Beijing's Stablecoin Ban as HashKey Pursues IPO

HashKey Holdings, the parent company of Hong Kong's largest licensed crypto exchange, is advancing toward a public listing despite escalating regulatory tensions between Beijing and the Special Administrative Region. The exchange's recent filings with the Hong Kong Stock Exchange (HKEX) signal progress in its initial public offering (IPO) plans, while China's central bank continues to reiterate its hardline stance against stablecoins, casting doubt over Hong Kong's ambitions to become a crypto hub.

The People's Bank of China (PBOC) reaffirmed on November 28 that stablecoins remain illegal under its 2021 crypto ban, warning of risks including money laundering and illegal cross-border capital flows. This declaration followed a high-level meeting involving 13 government agencies, where officials emphasized that virtual currencies, including stablecoins, lack legal tender status and constitute "illegal financial activities". The PBOC's stance has intensified scrutiny on Hong Kong's stablecoin framework, which was introduced earlier this year to attract regulated crypto businesses. Major mainland firms like Ant Group and JD.com, which had initially sought to leverage Hong Kong's framework to access the Chinese market, have since suspended plans for yuan-backed stablecoins due to regulatory pressure.

Hong Kong-listed crypto stocks have suffered in the wake of these developments. Yunfeng Financial Group, which expanded into tokenization services, fell over 11% in early trading, while OSL Group lost more than 5%. The selloff underscores market anxieties about Beijing's ability to undermine Hong Kong's crypto ambitions, despite the territory's distinct regulatory autonomy. Meanwhile, HashKey's own financials reveal the sector's challenges: the exchange reported a net loss of over $151 million in 2024, driven by ultra-low trading fees and insufficient diversification into tokenization and Web3 events.

China's enforcement of its crypto ban remains inconsistent, with Bitcoin mining and retail trading persisting through underground networks and offshore platforms. Despite this, Beijing's recent crackdown has intensified, including social media account closures and restrictions on stablecoin research by local institutions. The PBOC has also blocked major mainland firms from issuing stablecoins in Hong Kong, asserting that currency issuance must remain a state monopoly. This has created a paradox for Hong Kong: while its regulatory framework aims to attract global crypto firms, its proximity to a market where demand for digital assets remains robust has become a strategic liability.

HashKey's IPO filing, however, highlights the region's determination to carve out a crypto niche. The exchange, which dominates Hong Kong's licensed market with a 24-hour trading volume of nearly $108 million, has secured JPMorgan and Guotai Junan as joint sponsors. Yet its financial model remains fragile, with tokenization and Web3 events contributing minimal revenue. The IPO's success will hinge on investor confidence in Hong Kong's ability to navigate Beijing's regulatory overhang while maintaining its position as a crypto gateway for mainland investors according to market analysis.