China’s crypto market is gaining traction. For the first time, Gaorong Ventures, a major Chinese investment firm, has put $30 million into HashKey Group, a company that runs Hong Kong’s largest approved crypto exchange.
A HashKey spokesperson said Gaorong’s $30 million investment was at a post-money valuation of close to $1.5 billion.
This is new. Normally, venture capital companies in the country don’t usually put money directly into a sector where prices are volatile, and there is a lot of speculation. Gaorong Ventures focuses on investments related to Technology, Media, and Telecommunications. It is known for investing in Chinese tech companies like Meituan and PDD Holdings Inc.
On the other hand, HashKey Group operates one of Hong Kong’s first two licensed crypto bourses. Its business lines include offering crypto trading, venture funding, and asset management.
Hashkey has been lucky for two consecutive years. Reports say that last year, the company also raised $100 million and reached unicorn status with almost the same valuation.
However, Chinese investors are betting more on digital assets. For instance, Tencent Holdings Ltd recently put money into Wintermute Trading Ltd, a company that makes crypto markets. Hongshan, formerly known as Sequoia China, invests in web3 companies like Animoca Brands.
China’s role in Crypto
China was the place to trade crypto, and there were many active markets there. But in 2017, the Chinese government banned crypto exchanges and initial coin offerings (ICOs) because of worries about financial security.
In 2021, China tightened its rules by focusing on crypto mining, which used to be a huge business in the country. They did this because they were worried about speculative risk, financial stability, and energy use.
However, China still has an impact because of its economy and Bitcoin. China has 40% of the world’s cash (M2), while the U.S. only has 20%. China has the second-largest economy in the world and more than four times the population of the U.S.
A lot of this liquidity is limited by capital controls, but for Bitcoin, which is not related to traditional banking. Even though China is against crypto, the country is actively trying to get other areas to use blockchain technology. This is because it Seeks to reduce what it views as overdependence on the US-led financial system.
Hong Kong has been taking steps since October 2022 to make rules about digital assets easier to understand and more streamlined. This has allowed qualified entities to join the market and helped the industry grow.
Some of the things that have been done so far are a licensing system for crypto exchanges, selling spot crypto ETFs on HKEX, and issuing digital bonds.
A study on stablecoins was finished by the HKMA at the beginning of 2024. The consultation led to the creation of a legislative bill for a stablecoin licensing system. It was sent to Hong Kong’s Legislative Council at the end of 2024. However, other rules are still being worked on for issuing stablecoins and selling them over the counter.
Crypto users and people who work in the industry say that Chinese citizens can still open accounts and trade crypto on platforms like OKX and Binance. People in mainland China can’t get to the platforms’ websites, but they can be reached through virtual private networks, or VPNs. People in cities often use VPNs to get around government internet rules.
There are also brokers, like Chen Xin, who are still helping people change big amounts of Chinese yuan into crypto. Chen was a go-between in China’s shadowy financial system. He would take more than $100,000 in cash and use online trading sites to exchange it for the crypto tether.
Clearly, China is hungry to hold a strong position in the crypto industry. People still hope that the government, whose currency is still losing value, will embrace the industry fully.
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