Hong Kong Official Proposes Making Bitcoin a Reserve Asset for the Region. Why Is This Important?
There is growing interest in crypto around the world, even within the context of national governments. Now, Hong Kong Legislative Council member Wu Zejuan has suggested that the special administrative region could take advantage of China’s “one country, two systems” policy to include Bitcoin as a reserve asset to ensure the region’s financial stability. And in an interview with Wen Wei Po, he said that Hong Kong could explore the market impact of Bitcoin spot ETFs based in the US.
Let us recall that the approval and launch of spot ETF trading on BTC in January 2024 became the reason for active growth of the coin market. As a result, thanks to this, Bitcoin for the first time in its history updated the maximum rate from the previous bull run before the halving, which last took place on April 20, 2024 and reduced the block reward from 6.25 to 3.125 coins.
The year is ending more than successfully for Bitcoin ETFs. Their total net capital inflow is $35.24 billion. And this is despite the outflow of $21.48 billion from the Grayscale GBTC instrument.
US Spot Bitcoin ETF Fund Flows Over the Year
Which countries and regions buy bitcoins
Among other things, Jiejuang also pointed to the experiences of countries like El Salvador and Bhutan, which have previously recognized Bitcoin as a strategic asset for their economies. He added that US President-elect Donald Trump’s proposal to include BTC in the US national reserve could significantly affect traditional markets.
According to Jiejuang, Hong Kong authorities should effectively use the “one country, two systems” approach and first include Bitcoin in ETFs traded on local exchanges. Then the region could begin implementing ways to increase the share of BTC directly in its reserves.
The "one country, two systems" approach was proposed in the 1980s by Deng Xiaoping to peacefully reunify China with Hong Kong, Macau, and Taiwan. Under this principle, Hong Kong and Macau retained a high degree of autonomy, including their own legal, economic, and social systems, after they returned to Chinese sovereignty in 1997 and 1999.
But despite guarantees of autonomy for 50 years, the approach has come under fire in recent years for Beijing’s growing control over the regions. At the same time, Taiwan refuses to accept the model, seeing it as a threat to its own democratic system, which makes sense given China’s behavior.
Inflows and Outflows from Spot Bitcoin ETFs
The official emphasized the potential of cryptocurrency to attract talent and investment, as well as its ability to strengthen financial stability amid market fluctuations. He noted that using Bitcoin as a reserve asset can reduce the impact of negative factors in the traditional economy.
According to sources told Cointelegraph , the Hong Kong Financial Services and Treasury Bureau will develop regulations for cryptocurrencies based on the principle of “same business, same risks, same rules.” This is how Jiejuang commented on this.
If major economies take the initiative to include Bitcoin in their reserves, the value of the cryptocurrency will become more stable. This will lead to other countries following their example and reducing the volume of traditional assets. This will cause a drop in the price of traditional assets and a decrease in government financial reserves.
China currently holds 190,000 BTC, confiscated through various means, making the country’s reserve the second-largest after the United States. Earlier in mid-2024, another Hong Kong Legislative Council member, Johnny Eng, announced plans to collaborate with various stakeholders to assess the feasibility and potential benefits of including Bitcoin in the special administrative region’s financial reserves.
Meanwhile, monthly trading volume on decentralized exchanges (DEX) hit a record high, rising to $462 billion in December. According to a report from analytics platform DefiLlama, December was the most successful month for DEX trading volume, continuing the upward trend from November.
Dynamics of trading volume on decentralized exchanges
Decentralized trading platforms recorded a monthly volume of $374 billion in November, boosted by expectations of more favorable regulation in the United States following Donald Trump’s victory in the presidential election.
Uniswap remained the top DEX by trading volume, recording $106.4 billion in monthly trading volume over the past 30 days. PancakeSwap came in second with $96.4 billion in monthly volume. Meanwhile, the largest Solana-based DEX, Raydium, came in third with $58 billion in the past 30 days.
Top Trading Platforms in DeFi
Earlier, analysts at Syndica reported that Solana-based decentralized applications generated $365 million in revenue in November, largely due to meme tokens launched on the Pump.fun platform.
Aerodrome and Orca took fourth and fifth place. Aerodrome reached $31 billion in volume, while Orca’s trading volume was $22 billion. Lifinity, Curve Finance, and Hyperliquid together registered $43.6 billion in the month.
Such statements on recognizing Bitcoin as an asset for national reserves will not necessarily lead to an immediate result. However, such remarks still attract the attention of investors to what is happening in the world of crypto. Therefore, sooner or later, purchases of BTC and other coins, even at the state level, will be much larger.
