Caixin reveals the inside story of institutions shrinking their crypto asset businesses in Hong Kong: avoiding the systemic and dependency risks that may arise from pegging stablecoins to the US dollar.

Odaily Planet Daily reports that various institutions have been ordered to scale back their cryptoasset operations in Hong Kong. Internet platforms, Chinese brokerages, and banks in Hong Kong have been ordered to temporarily suspend all cryptoasset-related activities, including investment, trading, issuance of RWAs, and stablecoins. Brokerages licensed to provide virtual asset trading services have drawn particular scrutiny, as clients can directly trade Bitcoin, Ether, and Tether within their accounts. Hong Kong categorizes virtual assets into securities and non-securities, imposing varying degrees of restrictions on Chinese companies engaging in virtual currency-related activities, including virtual currency investment, issuance of RWAs overseas using domestic assets, provision of virtual currency trading services, and issuance of stablecoins. It is understood that the fundamental reason for these restrictions on investment and trading in virtual currencies by various types of institutions is to prevent potential systemic and dependency risks that may arise when domestic companies are tied to US dollar-denominated stablecoins and unpegged virtual currency systems.

It is reported that the "treasury company" model will be restricted. During this wave of virtual currency innovation, the "treasury company" model, which leverages investments in cryptocurrency assets, has been rapidly replicated. Many Chinese companies listed on the Hong Kong and US stock markets have announced purchases of crypto assets such as Bitcoin and Ethereum, hoping to profit from both stock and coin prices. Now, this model is likely to be restricted. (Caixin.com)