Why Trump believes ‘China is big into crypto’ despite ban

President Donald Trump instructed 60 Minutes on November 2 that China is a aggressive risk in crypto, warning that “China may be very a lot into it proper now.”

The assertion reveals a paradox. Beijing banned crypto buying and selling and mining in 2021, but Trump sees the nation as America’s fundamental rival in digital belongings.

The decoupling is probably going not about secret intelligence or a coverage reversal that went unnoticed, however slightly about merging Hong Kong’s licensed market, Beijing’s central financial institution’s digital foreign money ambitions and secure grey market foreign money flows into one “China” story.

The timing is important as Hong Kong’s Securities and Futures Fee introduced throughout Hong Kong FinTech Week that it’s going to loosen up guidelines permitting licensed digital asset platforms to faucet into international order books and liquidity swimming pools someday later.

The transfer deepens Hong Kong’s integration with worldwide crypto markets, whereas the mainland maintains its ban.

Trump’s assertion, whether or not intentional or not, captures an actual dynamic: “China” is working on a number of crypto fronts concurrently, however not on those most individuals assume.

The ban on the mainland stays in impact

The Folks’s Financial institution of China declared all cryptocurrency transactions unlawful on September 24, 2021, masking each peer-to-peer buying and selling and mining actions.

The ban bans home exchanges, criminalizes facility providers and blocks international platforms from serving mainland customers. No main outlet or authorized tracker is reporting a reversal of that framework on the time of writing.

The ban achieved its speedy targets of boosting international exchanges, collapsing home mining operations, and limiting retail entry to speculative tokens.

What it did not take away had been the explanations folks wished crypto within the first place: capital mobility, cross-border settlement pace, and mistrust of intermediaries.

These forces moved into Hong Kong’s licensed regime, moved into over-the-counter stablecoin channels, or discovered expression in Beijing’s personal digital foreign money venture.

Hong Kong because the tolerant distinctive place

Hong Kong’s regulatory strategy goes in the other way. The SFC launched a licensing framework for digital asset buying and selling platforms in June 2023, permitting retail entry to accredited tokens on compliant exchanges.

In April 2024, Hong Kong had accredited spot Bitcoin and Ethereum ETFs, merchandise beforehand unavailable on the mainland, giving institutional traders a regulated entry level.

The November 3 announcement additional expands this tolerant stance. Licensed platforms can now connect with international liquidity sources as an alternative of working siled order books from Hong Kong.

The change removes a structural drawback that Hong Kong’s home market alone can’t generate the depth or spreads aggressive with Binance or Coinbase.

Connecting to worldwide liquidity turns Hong Kong licensed platforms into viable alternate options for stylish merchants in search of regulatory protection with out compromising execution high quality.

That is the mechanism that makes Trump’s framework coherent, even whether it is technically inaccurate. When he says “China,” he’s most likely lumping a Particular Administrative Area with de facto coverage autonomy into the identical psychological class because the mainland.

Hong Kong’s strikes, retail entry, ETFs, and now international liquidity are creating the looks that “China” is making progress in crypto whereas Beijing’s buying and selling ban stays in place.

The CBDC layer: digital cash, not crypto

Beijing’s e-CNY pilot represents the world’s largest central financial institution digital foreign money implementation by transaction quantity.

In line with experiences, cumulative transactions exceeded 7 trillion yen by mid-2024, masking retail funds, authorities funds and company settlements.

Hong Kong started accepting e-CNY at native retailers in Might 2024, linking the mainland’s digital foreign money infrastructure with a world monetary heart.

The e-CNY capabilities as programmable state cash, centralized, monitored and designed to strengthen slightly than problem Beijing’s financial management.

It shares no philosophical DNA with Bitcoin or decentralized finance. But its scale and cross-border growth into Hong Kong contribute to the notion that ‘China’ is working on the digital asset frontier.

Trump’s feedback confuse this state-issued digital foreign money with permissionless crypto, however the confusion displays an actual actuality. China has essentially the most superior retail CBDC in manufacturing, giving it credibility in claiming management in digital finance even because it bans decentralized alternate options.

In line with experiences final yr, Chinese language regulators are finding out offshore yuan-backed stablecoins issued by way of Hong Kong, with the purpose of tapping into cross-border settlement flows at the moment dominated by dollar-pegged tokens.

The proposal would enable Beijing to implement capital controls on the mainland whereas offering exporters overseas with a compliant digital settlement instrument.

adoption of stablecoins and grey market hashrate

Gaps in enforcement and financial incentives created a parallel system. Chinese language exporters are more and more accepting USDT for cross-border funds, bypassing the gradual strategy of financial institution transfers and capital controls.

The adoption just isn’t centrally coordinated, however is so widespread that Beijing can’t ignore it.

The movement of stablecoins additionally elevated in commerce channels between Russia and China as Western sanctions difficult conventional financial institution rails, turning digital {dollars} right into a clearing layer for transactions that the formal monetary system struggles to course of.

This over-the-counter exercise explains why the assertion “China is massive in crypto” holds true for merchants and companies, whilst retail gross sales stay banned on the mainland.

The excellence between prohibited hypothesis and tolerated business use creates room for stablecoins to operate as infrastructure slightly than as an funding asset.

Beijing has not legalized this exercise, however neither has it eradicated it, making a calculated ambiguity that enables cross-border commerce. On the identical time, the state is investigating how these flows might be channeled into manageable devices.

Moreover, China’s hashrate didn’t drop to zero following the 2021 mining crackdown. Cambridge’s mining map reveals continued exercise, possible attributable to operations transferring to distant provinces or transferring {hardware} overseas whereas sustaining Chinese language possession.

Extra importantly, Chinese language firms proceed to fabricate the gear that secures international cryptocurrency networks.

Bitmain, the dominant ASIC producer, operates from Beijing and continues to broaden its manufacturing capability in Southeast Asia and North America.

Even when there have been no Bitcoin mining in China, the nation would stay deeply entrenched in crypto infrastructure by way of its {hardware} provide chains.

Trump says ‘China is massive in crypto’: what it most likely means

Trump’s assertion (most likely) doesn’t mirror a reversal in mainland coverage or labeled intelligence. It displays a strategic actuality that’s extra advanced than binary narratives enable.

The remark ‘China is massive in crypto’ collapses quite a lot of separate phenomena. Hong Kong’s licensed market is now linked to international liquidity as Beijing’s over 7 trillion yen CBDC program extends to Hong Kong.

Exporters management the USDT commerce regardless of capital controls, and Chinese language {hardware} producers present the worldwide mining infrastructure.

The liquidity announcement in Hong Kong is necessary as a result of it expands the channel by way of which Chinese language capital can legally entry the crypto markets.

Licensed platforms that connect with Binance or Kraken order books supply land-based traders offshore pathways that look much less like evasion and extra like regulatory arbitrage.

The notion that “China” competes within the crypto area is bolstered not as a result of Beijing has lifted its ban, however as a result of Hong Kong has constructed a compliant various that achieves comparable market entry by way of a special authorized structure.

Trump campaigned on making America the crypto capital, framing the difficulty as a binary battle for primacy.

His feedback deal with China as a unitary participant, when in actuality the nation faces jurisdictional divisions, state versus non-public initiatives and retail bans that go hand in hand with institutional entry.

But the core concern stays: China maintains a number of positions in crypto regardless of its home ban.

The aggressive panorama Trump describes exists, nevertheless it does not take the shape most individuals take.

The ban on the mainland stays intact. The risk comes from Hong Kong’s licensed various, Beijing’s CBDC infrastructure, and from exporters utilizing stablecoins, slightly than a sudden Chinese language adoption of decentralized finance.

What Trump referred to as “going massive on it” is much less a coverage shift than an acknowledgment that China has discovered methods to take part within the crypto markets with out legalizing the exercise that regulators worry most, particularly uncontrolled retail hypothesis in unauthorized belongings.