As Japan takes aim at crypto, first mover Hong Kong must look out

Mere days after her election as Japan’s new prime minister, Sanae Takaichi delivered a policy speech declaring that a major priority was to build a strong and resilient economy. Since then, her administration has ushered in a rapid-fire series of policies to support digital assets, with the goal of countering Japan’s sluggish economic growth.

This shift has introduced a new dynamic in Asia, with Tokyo clearly no longer content to watch Hong Kong become Asia’s premier cryptocurrency hub. Instead, Japan is positioning itself as a direct competitor, leveraging its deep credibility, massive retail market and governmental support to revitalise its economy and reinforce its status as a global financial leader.

Hong Kong has made headlines in the past year as Asia’s emerging primary destination for cryptocurrency and other Web3 initiatives. Despite bans on cryptocurrency trading and mining within mainland China, Hong Kong has shaped its own narrative as a digital assets hub.

This includes passing a stablecoin ordinance, approving an exchange-traded fund (ETF) that tracks the cryptocurrency token Solana, and supporting programmes such as the Cyberport Blockchain & Digital Asset Pilot Subsidy Scheme, which focuses on advancing Hong Kong-based Web3 development through projects primarily focused on real-world asset (RWA) tokenisation.

As a result of these concerted efforts, Hong Kong has emerged as the clear leader within the digital assets space in the Asia-Pacific. But its strict regulatory environment – which includes high liquidity reserve requirements, a challenging licensing approval structure and stringent anti-money-laundering rules – has created significant friction for digital asset companies and investors.

Additionally, Hong Kong’s ever-evolving political and legal alignments with Beijing can create uncertainty for finance leaders who need a safe and stable regime to anchor their long-term investments. This provides an opening for Tokyo – with its new prime minister and a new outlook on digital assets enabling Japan to bank on digital assets to usher in a new era of prosperity.

  

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