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Crypto prices surge on China's rate rise halt

crypto  A representation of Bitcoin cryptocurrency is seen amid China's flags in this illustration picture taken September 27, 2021. REUTERS/Florence Lo/Illustration
There is a perception that attitudes are softening towards crypto in both Hong Kong and Beijing. Photo: Florence Lo/Reuters

China-based blockchain companies have surged, with some up 500% in the past week, after a decision by the nation's central bank to halt rate rises and the perception that attitudes are softening towards crypto in both Hong Kong and Beijing.

The cryptocurrency market cap increased on Monday to $1.19tn (£985bn), up 1.1% in the past 24 hours, according to data from Coingecko.

Bitcoin (BTC-USD) rose 15% in the past week to over $25,000.

The second largest cryptocurrency by market cap, ethereum (ETH-USD), increased by 12.5% in the past week to $1,694.

Most gains have been reverberating from China, where the nation's central bank decided on Monday to leave its interest rate level unchanged. The resulting liquidity boost spilled over into the crypto-ecosystem.

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Even though China has blocked citizens from buying bitcoin and crypto, citizens are being encouraged to spend, and the increased economic activity is positively affecting a range of China-based blockchain projects.

Crypto coins with strong links to China, such as NEO (NEO-USD), VeChain (VET-USD) and Phoenix Chain (PHB-USD) have all pumped in the past week.

There is a perceived softening towards crypto in Beijing and Hong Kong, with one China-based crypto firm, Conflux (CFX-USD), seeing gains of over 500% in the past week. The enterprise blockchain token has skyrocketed 1,300% since the beginning of 2023.

Conflux announced last week that it was partnering with China Telecom to build blockchain-based SIM cards for mobile phones.

The Chinese Conflux Network is a government-approved blockchain, used in conjunction with the country’s Blockchain Service Network (BSN), China's blockchain-tech platform for enterprise use.

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Craig Erlam, senior market analyst at OANDA, told Coindesk: “The bullish case for the Chinese economy remains solid, and the likely release of stimulus over the next couple of months as it gathers pace could supercharge that.

“Domestic demand is going to be the cornerstone of the economic revival, and policymakers appear poised to unleash that to its full potential.”

China's central bank leaves rates unchanged

China's freeze on rate rises has stimulated a flow of investment into crypto.

On Monday, the People’s Bank of China left its one-year and five-year interest rates unchanged. This had an affect on the CSI 300 (000300.SS), which tracks stocks of the largest listed companies in Shanghai and Shenzhen.

Stocks in China rose to close 2.45% higher at the end of trade on Monday.

The cryptocurrency market has marched in lockstep with equity prices, especially tech stocks. As Shenzhen tech stocks rose, so did China-based blockchain and crypto assets.

The Shenzhen Component (399106.SZ) gained 2.03% to close at 11,954.13 on Monday.

Hong Kong removes crypto ban

The loosening of monetary controls by China's central bank saw a lift in Hong Kong stocks, the Hang Seng index (^HSI) gained 0.85% in its final hour of trade on Monday, and the Hang Seng Tech index (HSTECH.HK) rose 1.32%.

This coincided with Monday's announcement by Hong Kong’s Securities and Futures Commission (SFC) that it plans to allow retail crypto trading within the financial hub.

The SFC said it would commence a consultation process for Virtual Asset Service Providers (VASPs) that are seeking a license to provide trading services for retail customers within Hong Kong.

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The move would see a process of registering tokens prior to listing them on exchanges so that only pre-approved tokens would be available to retail customers.

Representatives from China’s Liaison Office have been frequent guests at the Hong Kong’s crypto gatherings over the past months suggested that Beijing might be subtly endorsing the idea of Hong Kong becoming a crypto hub, according to a Bloomberg report this week.

Crypto entrepreneur Justin Sun's Hong Kong move

Justin Sun, founder of the Tron Network, also announced this week that he will move his Huobi cryptocurrency exchange Asia headquarters from Singapore to Hong Kong, in order to capitalise on the city's attempts to establish itself as a crypto hub.

Sun told Nikkei Asia that the crypto-friendly policies recently announced by the Hong Kong government, including allowing retail participation in crypto markets, was driving the move.

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