Blockchain and Crypto have a complicated status in China: Beijing says no to crypto, but yes to blockchain. It still prohibits trade building infrastructure.

Now, with Hong Kong, offering regulated crypto markets, insiders say a loophole will appear.

If China already allows investors to buy US shares through its qualified domestic institutional investor (QDII) program, why not Bitcoin? The key, an expert argued on stage at the consensus Hong Kong, is control, and Beijing may have just found a way to keep it.

In China, there are two systems that mainland investors can buy and sell stocks outside China. First, there is QDII that allows selected investors to buy us ETFs using RMB.

Then there is also Shanghai-Hong King Connect and Shenzhen-Hong King Connect, who lets Chinese investors buy and sell Hong Kong shares through mainland companies, with all trades run in RMB.

“The key [with these systems] If this capital is never freely flowing out of China, and if you use this same logic in crypto, there is no reason why it could not work the same way, “said Yifan, CEO of Red Date Technology, on stage at Consensus Hong Kong.

He emphasized that the largest regulatory obstacle is not even crypto, but capital control, which ensures that funds do not move freely in and out of China.

These capital controls are in place as they prevent excessive currency fluctuations and capital flights to maintain the stability and value of RMB. They are also one of the reasons why Hong Kong’s crypto-ETFs, with their redemption in nature, were not allowed to be on the mainland.

“What is the difference between a Hong Kong-regulated stock and a Hong Kong-regulated crypto-active?” He continued. “If they have a system that you can buy and sell in RMB, but never move money outside China, it’s just another regulated investment product.”

This system does not allow Chinese investors to self -defense their crypto. Instead, purchases would be held by an intermediary, such as a licensed securities company.

“They buy crypto directly, but it’s not like they hold it themselves,” he said. “The security company in the middle is actually holding it for you.”

This model is in line with China’s approach to shares and ETF investments.

Just as mainland investors can trade us ETFs through QDII, but never take direct custody, they could get exposure to crypto without owning the underlying assets – no money moves across borders.

For a nation with 200 million retail investors and an economy that needs stimulus, regulated crypto access through Hong Kong’s sandbox may offer Beijing a calculated compromise

Blockchain vs. Crypto

China has long been a supporter of blockchain technology while taking a cold approach to crypto.

“We do not allow cannons in China, but we can still make steel,” he explained as an analogy. “Technology is not regulated so you can build all kinds of applications. But when a certain application triggers rules, it’s different.”

But based on his conversations with financial regulators, this could change.

“I see some signal from financial regulators,” he said. “They start talking about Bitcoin and say we need to pay more attention and investigate more on digital assets.”

Could this lead to wider adoption? Two years ago he would have said ‘zero chance.’

“Now I would say that there is more than 50% chance in three years,” he concluded.

And you can take these odds to the polyming field.