- Hong Kong’s OTC crypto market thrives despite a smaller population, nearing China’s trading volume.
- Chainalysis suggests Beijing’s growing crypto tolerance, thanks to Hong Kong’s stable OTC market.
- Hong Kong leads in significant institutional crypto transactions, while South Korea favors retail trading on exchanges.
Despite its smaller population, Hong Kong’s vibrant over-the-counter crypto market generated a trading volume of $64 billion in the past year, which is only slightly lower than China’s $86.4 billion, despite the global downturn in crypto markets. Although there has been a decline in transaction values in both China and Hong Kong over the past year due to Beijing’s ongoing strict ban on crypto assets and the prolonged crypto market downturn, Chainalysis contends that the existence of substantial OTC markets, which have remained relatively stable amid regional and global declines, suggests a certain level of crypto tolerance on the part of Beijing.
The report further highlights:
The increasingly close relationship between China and Hong Kong leads some to speculate that Hong Kong’s growing status as a crypto hub may signal that the Chinese government is reversing course on digital assets, or at least becoming more open to crypto initiatives.
Chainalysis
It notes that a significant factor behind this trend is the robust over-the-counter (OTC) market in Hong Kong. OTC markets, catering primarily to institutional investors and high-net-worth individuals, specialize in discreetly handling substantial transfers to prevent impacting asset prices or disclosing traders’ actions. Hong Kong’s emphasis on OTC activity becomes evident when examining the distribution of transaction volume by transaction size in the city, as illustrated in the chart below, in comparison to its neighboring regions and the global average.
According to Chainalysis, Hong Kong stands out in the realm of significant institutional crypto transactions when compared to other Asian regions. Their data reveals that 46.8% of Hong Kong’s yearly crypto trades involved institutional transactions exceeding $10 million, with retail trades under $10,000 representing just 4% of the city’s volume. This figure is slightly below the global average of 4.7%.
Conversely, South Korea exhibits a strong inclination towards retail trading on centralized exchanges, where “professional” traders conducting transactions ranging from $10,000 to $1 million constitute 40% of the overall trading volume. In contrast, Japan’s transaction distribution closely mirrors global patterns, striking a balance between centralized exchanges and DeFi protocols.
