Hong Kong faces an uphill battle in maintaining an edge in the virtual-asset industry, experts say, as US president Donald Trump unveils digital asset-friendly policies aimed at making the US the "crypto capital of the planet".
Trump on Friday signed a long-awaited executive order on developing America's digital-asset sector, with measures including creating a working group tasked with advising the White House on crypto regulations, and revoking previous orders that he said had "suppressed innovation".
The executive order, making it clear to the industry that the Trump administration is "in favour of making a 180-degree turn on crypto", will add challenges to Hong Kong's virtual-asset-hub goal, particularly in attracting international talent, said Stephan Lutz, CEO of cryptocurrency exchange BitMEX.
The previously unfriendly environment for crypto in the US had in part made Hong Kong "one of the few very vibrant and rather successful hubs for international crypto in Asia", he said.
The Hong Kong flag and stacks of bitcoin tokens are shown in this illustration picture. Photo: Shutterstock Images alt=The Hong Kong flag and stacks of bitcoin tokens are shown in this illustration picture. Photo: Shutterstock Images>
"Hong Kong will face - not today, but after people have gained trust in the Trump administration's actions - way stronger headwinds for its crypto industry," Lutz said.
Hong Kong in late 2022 set out its ambition to become a global virtual-asset hub, and has charged ahead with a series of initiatives over the past two years, including a licensing regime for crypto exchanges, exchange-traded funds that directly track bitcoin and ether, and introducing a legislative bill on stablecoins.
The city is now moving to " adjust " a proposal for regulating over-the-counter virtual-asset trading after receiving market feedback, and will also introduce a licensing regime for crypto custodian services next year, Joseph Chan, acting secretary for financial services and the treasury, said in a statement in December.
A few days into the Trump administration, the US Securities and Exchange Commission has already made a move that could potentially take some wind out of Hong Kong's sails.
The US regulator on Thursday rescinded the controversial accounting guidance known as SAB 121, which required US firms holding crypto assets in custody for clients to record a liability on their balance sheet, which made it "economically prohibitive" for them to provide such custody solutions, according to Andrew Fei, partner at King & Wood Mallesons in Hong Kong.
Pedestrians walk past a bitcoin display in Hong Kong, February 15, 2022. Photo: Getty Images alt=Pedestrians walk past a bitcoin display in Hong Kong, February 15, 2022. Photo: Getty Images>
"The repeal of SAB 121 means that more US firms will enter into the digital-assets custody space," Fei said. "This comes at a time when Hong Kong is considering a new licensing regime for virtual-asset custody service providers."
Trump's new plans for the working group to develop a regulatory regime for stablecoins could also thwart Hong Kong's stablecoin developments.
The US stance on supporting US dollar stablecoins might "suppress" other fiat-backed stablecoins, including Hong Kong dollar stablecoins and offshore renminbi stablecoins, in international competition, said HashKey Exchange managing director Terence Pu.
"The development and global promotion of [Hong Kong dollar] stablecoins will face further challenges," Pu said. "Hong Kong needs to explore ways to find breakthroughs in the multicurrency stablecoin ecosystem to maintain its competitiveness in the crypto asset space."
This article originally appeared in the South China Morning Post (SCMP) , the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
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