China’s approach to re-entering the cryptocurrency market is expected to begin with stablecoins, forming the foundation of a broader digital financial infrastructure. Dr. Xiao Feng, CEO of HashKey Group, has outlined a phased strategy in which stablecoins will serve as the initial building block, facilitating real-time, peer-to-peer transactions on public blockchains. These digital assets are not merely seen as payment tools but rather as critical infrastructure for trading and settling volatile cryptocurrencies in a transparent and efficient manner [1].
The evolution of China’s crypto adoption is anticipated to progress from stablecoins to real-world assets (RWA), which represent traditional financial instruments tokenized on the blockchain. This shift indicates a maturing market where digital representations of real estate, commodities, and other tangible assets are gaining traction. The transition from native digital assets to digital twins is expected to unlock trillions in value, according to Dr. Xiao, as traditional offshore models are replaced by regulated onshore exchanges [1].
Hong Kong plays a central role in this digital financial strategy. Its stringent Anti-Money Laundering (AML) regulations and robust legal framework under the “One Country, Two Systems” model position the city as a trusted digital finance hub in Asia. The combination of a common law system and proactive regulatory oversight allows Hong Kong to act as a bridge between China’s domestic market and the global financial system. This environment fosters innovation while ensuring compliance and consumer protection [1].
Dr. Xiao emphasizes a layered approach to balancing decentralization and regulation. While blockchain protocols must remain open and permissionless to ensure fairness and transparency, application layers can be centralized for efficiency and to meet compliance requirements. This dual structure allows for innovation while maintaining the necessary safeguards for market growth [1].
China’s strategic re-entry into the crypto space reflects a response to global monetary competition. The phased adoption of digital assets, starting with stablecoins and moving toward RWA and potentially Bitcoin, highlights a calculated and pragmatic path. This approach is designed to align with international trends while maintaining regulatory control over the financial system [1].
The role of compliance—particularly AML—cannot be overstated in this transition. Blockchain technology offers enhanced transparency and traceability compared to traditional financial systems, allowing regulators to monitor transactions more effectively. This level of oversight enhances trust and supports the expansion of digital finance, particularly in regions where regulatory frameworks are still evolving [1].
The market is now closely watching how these developments unfold, with a focus on how China’s regulatory environment and Hong Kong’s strategic position will shape the future of digital assets in the region. Investors and market participants are advised to monitor these trends as they could unlock significant opportunities in the coming years [1].
Source: [1] China’s Crypto Re-Entry May Begin with Stablecoins, Potentially Leading to Bitcoin Adoption, Says Dr. Xiao Feng https://en.coinotag.com/chinas-crypto-re-entry-may-begin-with-stablecoins-potentially-leading-to-bitcoin-adoption-says-dr-xiao-feng/
