China versus Hong Kong different approaches to cryptocurrencies

Written by Jonathan Chu, Partner, CMS Law

I. Regulatory Differences on cryptocurrencies

A.  Mainland China’s stance on cryptocurrencies and blockchain

(1)    Ban on initial coin offerings (“ICOs”) and cryptocurrency exchanges

Mainland China has implemented a stringent regulatory framework for ICOs and cryptocurrencies. The evolution of this framework can be traced through several key regulatory actions:

(1)  In 2013, Chinese authorities prohibited financial institutions from engaging in Bitcoin-related business.

(2)  In 2017, China banned ICOs and cryptocurrency exchanges, prohibiting all forms of ICO activities and exchange services for token financing and trading platforms.

(3)  In 2018, the government further tightened controls by prohibiting payment institutions from facilitating cryptocurrency transactions.

(4)  A significant crackdown occurred in 2021 with the release of the "Circular on Further Preventing and Resolving the Risks of Speculation in Cryptocurrency Trading (“Circular 237”). This circular:

·      Declared cryptocur…