A digital asset

investment fund

Viska is an alternative investment fund based in Iceland that invests in digital assets.

Published on

China and Hong Kong re-enter the digital asset world

Increasingly, nations worldwide are beginning to see opportunities in the substantial growth occurring in the cryptocurrency sector. Many are trying to attract businesses focusing on this new technology. This trend is often compared to the Silicon Valley boom in the United States, where many of the world's largest tech companies have emerged.

Authorities in Hong Kong have expressed interest in becoming a "crypto hub" due to its location that connects the West and the East, the robust financial infrastructure of the area, and a long history of free trade. Hong Kong authorities have also taken initiatives in developing the fintech sector, including regulatory frameworks for digital assets. Many interpret this change in tone as China becoming more open to cryptocurrency businesses, given that China currently leads in this area. This is big news since Hong Kong has historically played a pivotal role in connecting Western financial markets to China. Bloomberg recently reported on this issue, which can be seen here.

Furthermore, Bloomberg reported that Chinese state banks have taken the initiative to court cryptocurrency businesses, strongly indicating that authorities in Beijing are involved in these strategies, marking a U-turn in China's stance towards cryptocurrencies. See more here.

In addition, Chinese state-owned insurance companies (part of the China Pacific Insurance Company consortium) have invested in two investment funds that invest in cryptocurrency businesses. It is clear that China's attitude towards cryptocurrencies is undergoing significant positive changes. See more here.

Other countries have also been making their presence known in the crypto world. The Swiss city of Zug has emphasized attracting companies in the sector. Of 960 innovation companies operating in the field of cryptocurrencies in Switzerland, 433 are located in Zug. Also, Finma, the Swiss Financial Market Supervisory Authority, has been quite positive towards cryptocurrencies and has granted licenses to two crypto banks.

European Parliament recently adopted cryptocurrency legislation (MiCA) that marks a milestone in the adoption of cryptocurrencies and will support their development in the next few years. After its implementation, cryptocurrency companies can request and simultaneously obtain operating licenses in 27 European countries.

In April 2022, UK Prime Minister Rishi Sunak, the finance minister at that time, put forth a plan for the UK to become a "hub for cryptocurrency technology and investments."

The United Arab Emirates (UAE) has also seen opportunities to attract businesses in the cryptocurrency industry, where authorities have encouraged the adoption of blockchain technology. Dubai has become a hub for cryptocurrency startups, and numerous major cryptocurrency conferences are held annually in the city.

The US has performed well in certain areas regarding these matters. However, uncertainty still exists about regulations on specific aspects of the cryptocurrency sector, such as recent actions by the SEC. When China banned Bitcoin mining in 2021, many companies in the industry were in turmoil, but Americans welcomed them with open arms. Many of these companies moved their operations to Texas, and states like Wyoming and Florida have improved regulations to encourage cryptocurrency companies to establish their businesses there. However, today, the US risks falling behind in regulatory development, especially compared to Europe.

Recap, a company that provides services for cryptocurrency investors, recently published an article about the cities where cryptocurrency companies have been most active, demonstrating how widespread the operation of cryptocurrency companies is across all continents. The article can be seen here.

Countries are trying to attract cryptocurrency business activities from all over the world. There is regular debate in political discussions about how governments can create a competitive environment for the cryptocurrency sector and get ahead of other countries by being the first. Institutional investors will not fully engage until comprehensive legislation about the cryptocurrency sector is in place. It will be interesting to watch this development and whether China continues to open up to cryptocurrencies, and how much the new legislation in Europe will manage to attract more activity

Guðlaugur Steinarr GíslasonCIO - Founding Partner