A Hong Kong legislator is advocating for the special administrative region to take advantage of China’s "one country, two systems" policy by including Bitcoin in its national reserve for financial security. Wu Jiexhuang, a member of Hong Kong’s Legislative Council, believes that Hong Kong can study the market impact of United States-based spot Bitcoin exchange-traded funds (ETFs) and follow the lead of smaller nations like El Salvador and Bhutan.
China’s Role in Ensuring Hong Kong’s Financial Stability
According to Jiexhuang, Hong Kong’s authorities should make good use of the "one country, two systems" policy and first try including Bitcoin in ETFs before further exploring ways to increase Hong Kong’s Bitcoin holdings. He highlighted the potential of Bitcoin to attract talent and investment while also reinforcing financial stability amid market fluctuations.
The Benefits of Holding Bitcoin as Part of National Reserves
Holding Bitcoin as part of national reserves could mitigate disruptions caused by broader adoption in traditional markets, offering Hong Kong a first-mover advantage. Jiexhuang emphasized that if major economic powers take the initiative to include Bitcoin in strategic reserves, the value of Bitcoin will be more stable, causing more and more other countries to follow suit and reduce their holdings of traditional assets.
The Potential Consequences of Ignoring Bitcoin
"If major economic powers take the initiative to include Bitcoin in strategic reserves, the value of Bitcoin will be more stable, causing more and more other countries to follow suit and reduce their holdings of traditional assets," Jiexhuang said. "This will result in the fall of the price of traditional assets and will shrink the government’s fiscal reserves holding traditional assets."
Hong Kong Regulators’ Bet on Bitcoin
According to a report, China currently holds 190,000 Bitcoin through various confiscation efforts, making its Bitcoin reserve second only to that of the United States. In mid-2024, another Hong Kong Legislative Council member, Johnny Ng, announced plans to collaborate with various stakeholders to assess the feasibility and potential benefits of incorporating Bitcoin into the special administrative region’s financial reserves.
The Growing Importance of Bitcoin
Ng highlighted the increasing global awareness of Bitcoin, making it a crucial element in the discourse on digital assets and their integration into traditional financial systems. As the world becomes increasingly interconnected, it is essential for Hong Kong to take advantage of this trend and incorporate Bitcoin into its national reserve.
Why Include Bitcoin in National Reserves?
Including Bitcoin in national reserves can provide several benefits, including:
- Financial stability: By holding a portion of its assets in Bitcoin, a country can mitigate disruptions caused by broader adoption in traditional markets.
- Attracting talent and investment: A forward-thinking approach to cryptocurrency integration can attract top talent and investment to the region.
- Reducing risk: Diversifying national reserves with Bitcoin can reduce the risk associated with holding traditional assets.
The "One Country, Two Systems" Policy
China’s "one country, two systems" policy allows Hong Kong to maintain a high degree of autonomy in financial matters. This policy provides an opportunity for Hong Kong to take advantage of China’s growing influence and incorporate Bitcoin into its national reserve.
Regulatory Framework for Cryptocurrency
Hong Kong regulators have bet big on Bitcoin by formulating crypto regulations based on the "same business, same risks, same rules" philosophy. This approach aims to create a level playing field for traditional and digital assets, promoting financial stability and innovation.
The Future of National Reserves
As the world becomes increasingly digitized, it is essential for national reserves to evolve and incorporate new assets, such as Bitcoin. By doing so, countries can ensure their financial security and stability in an ever-changing economic landscape.
Conclusion
In conclusion, including Bitcoin in national reserves can provide several benefits, including financial stability, attracting talent and investment, and reducing risk. Hong Kong’s authorities should take advantage of China’s "one country, two systems" policy and explore ways to increase its Bitcoin holdings. By doing so, the special administrative region can maintain a competitive edge and ensure its financial security in an increasingly digital world.
References
- Johnny Ng’s announcement on incorporating Bitcoin into Hong Kong’s financial reserves.
- Wu Jiexhuang’s statement on the benefits of including Bitcoin in national reserves.
- The "same business, same risks, same rules" philosophy for crypto regulations in Hong Kong.