Hong Kong’s recent LEAP Digital Assets Policy Statement 2.0 has garnered significant attention, but beneath the hype lies a more consequential move: Beijing’s announcement to liquidate confiscated virtual currencies through Hong Kong’s licensed exchanges. This strategic decision positions Hong Kong as the dominant virtual asset hub and China’s strategic market operator.
China’s strategy is part of a carefully orchestrated plan to converge Hong Kong with its global ambitions. By injecting liquidity into the ecosystem, Hong Kong will become a market price vehicle capable of rapidly modulating supply and demand, influencing prices and stabilizing markets. This setup grants China the ability to control price, respond to geopolitical pressures, and shape market narratives.
The foundation of Hong Kong’s regulatory framework was established in 2022 with the Amendment of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The Stablecoin Ordinance, set to commence on August 1, 2025, will further develop the framework. However, laws and regulations alone cannot command markets; liquidity is key.
China’s decision to channel confiscated digital assets through Hong Kong’s licensed exchanges will inject real liquidity into the ecosystem, granting Hong Kong a decisive advantage in absorbing institutional capital and deepening market liquidity. This strategic move will also give China a powerful geopolitical tool to control global cryptocurrency valuations.
The US faces a strategic dilemma: should it continue with a passive crypto stockpile or consider new mechanisms to counterbalance Hong Kong’s growing control over crypto liquidity? Understanding the dynamic between Hong Kong’s LEAP policy and China’s crypto liquidation is crucial for market participants, lawyers, risk practitioners, and lawmakers.
In contrast to Singapore and Dubai, which face limitations in market scale and regulatory fragmentation, Hong Kong “holds all the cards.” With its mature regulatory framework, direct access to the world’s second-largest crypto holdings, and strategic deployment of liquidity, Hong Kong can modulate global crypto prices in real-time, attract institutional capital, and foster innovation within a stable environment.
Source: https://cointelegraph.com/news/china-crypto-liquidation-plans-reveal-its-grand-strategy