Rumblings of a crypto race

This report is from this week’s CNBC’s The China Connection e-newsletter, which brings you insights and evaluation on what’s driving the world’s second-largest financial system. You may subscribe right here.

America’s AI competitors with China is coming for cryptocurrencies.

No less than that is what U.S. President Donald Trump recommended following his assembly final Thursday with Chinese language President Xi Jinping — a commerce negotiation intently watched world wide.

“I wanna make crypto nice for America,” Trump instructed CBS Information. “The identical means we’re primary with AI, we’re primary with crypto. And I wanna maintain it that means.”

“I do not need China or anyone else to take it away,” he mentioned.

Whether or not Trump genuinely views Beijing as a severe menace or not, his remarks come as China sends new indicators on its crypto ambitions. Beijing has banned home crypto transactions since 2021, whereas Hong Kong, a particular administrative area of China, has maintained a managed system that encourages the event of digital property.

On Monday, Hong Kong eased its restrictions additional — permitting its licensed digital asset buying and selling platforms to attach instantly with world crypto exchanges and checklist new digital property and Hong Kong-regulated stablecoins, forgoing the necessity for a 12-month monitor document.

The announcement coincided with Hong Kong’s state-organized tenth FinTech Week, which opened simply as a political and enterprise spectacle in South Korea started to fade.

Hong Kong has been fast to comply with Washington’s lead, permitting exchange-traded funds monitoring spot  final 12 months, and went a step additional by approving spot ether ETFs to commerce practically three months earlier than the U.S. did.

Bitcoin, typically likened to digital gold, stays probably the most acknowledged cryptocurrency. Ether, one other main digital foreign money on the Ethereum community, is used each for funds and as “fuel” to pay for computation and run good contracts on decentralized purposes.

Ethereum Basis’s co-executive director Tomasz Ok. Stańczak, talking at a digital property discussion board Sunday on the sidelines of Hong Kong’s FinTech week, famous that over 60% of stablecoins —cryptocurrencies pegged to government-issued currencies— are deployed on the Ethereum community.

Within the viewers of about 300 individuals, practically 70% got here from conventional finance, based on Gavin Wang, chief funding officer at SNZ Holdings, a digital property funding agency that helped set up the discussion board.

That contrasts with how such occasions used to draw extra software program builders, mentioned Wang, who beforehand labored at UBS. The discussion board additionally introduced an “Ethereum Hong Kong Hub,” a co-working house to incubate associated startups, reflecting the town’s rising affect as Asia’s crypto gateway.

Even main business gamers are taking discover. Consensus, one of many world’s greatest crypto conferences in North America, expanded to Hong Kong for the primary time this 12 months, and plans to return in 2026.

Nonetheless, digital property stay comparatively nascent relative to conventional markets. The entire worth of cryptocurrencies has but to exceed $4.5 trillion, world inventory markets are nonetheless far bigger at $101.52 trillion.

Bitcoin fell sharply in the previous couple of weeks following considerations about escalating U.S.-China commerce tensions and frothy AI inventory valuations, briefly dipping beneath $100,000 for the primary time since late June.

“My assumption is it is roughly the identical group of [investors] switching round AI and crypto,” mentioned Jason Huang, founding accomplice of NextGen Digital Enterprise (NDV), an Asia-based fund invests in cryptocurrencies and associated shares. “As soon as AI cools down a bit, I believe crypto will come again.”

Huang’s $100 million fund surged by 375.5% within the two years by March 2025 — outperforming bitcoin by greater than 60% throughout that interval — and he is now launching a second fund. He mentioned lots of his buyers are rich Chinese language, including that subscriptions have elevated regardless of the latest selloff.

In response to Huang, his fund was down solely within the single digits final month, regardless of the , which he mentioned was the one largest liquidation day for crypto, even surpassing the notorious FTX trade collapse.

The subsequent part of competitors is probably not about tokens themselves, however about management. Governments are more and more keen to regulate the market by stablecoins backed by their very own fiat currencies.

A lot of the latest pleasure over digital property in Hong Kong stems from its push into stablecoins this 12 months, following the U.S. Genius Act, which goals to assist dollar-pegged stablecoins. It is taking the U.S. greenback competitors with the Chinese language yuan into the digital period.

“Each are striving to broaden their very own foreign money utilization to construct up their respective world person ecosystem,” mentioned Winston Ma, adjunct professor of regulation on the New York College College of Legislation.

Nevertheless it will not be simple, he identified, as Beijing has but to persuade people to undertake the digital yuan at scale, which is China’s central financial institution–issued digital foreign money designed to interchange some money transactions whereas permitting tighter oversight of its monetary system.

China has sought to advertise a digital model of its yuan foreign money in recent times but it surely has but to interrupt into the mainstream.

“U.S. greenback stablecoins might expertise the identical after they begin to emerge,” Ma mentioned.

The U.S. greenback accounted for just below half of worldwide funds by worth in September, tracked by worldwide monetary messaging service SWIFT, whereas the Chinese language yuan climbed one spot into fifth place with a 3.17% share.

Final week, China’s central financial institution governor Pan Gongsheng promoted the digital yuan, whereas taking a extra conservative view of stablecoins than many anticipated, reaffirming Beijing’s long-standing restrictions on speculative buying and selling in digital currencies.

Nonetheless, bitcoin blockchain information confirmed China stays a serious participant, rating third in world bitcoin mining exercise — behind the U.S. and Russia.

That is not a statistic Trump is more likely to overlook. Forbes estimates the U.S. president himself holds roughly $870 million price of bitcoin—one of many world’s largest private stashes.

— CNBC’s Anniek Bao contributed to this report.

Carlos Gutierrez, former U.S. Commerce Secretary, mentioned each Washington and Beijing obtained what they needed out of Trump and Xi’s assembly in South Korea. He added that markets will possible welcome indicators that the 2 international locations are giving one another causes to strengthen ties.

James Kim, chairman and CEO of the American Chamber of Commerce in Korea, mentioned the connection between the US and China is particularly vital for South Korea. He added that he was happy with the end result of the commerce talks between Washington and Seoul.

Xiaomeng Lu, director of geo-technology at Eurasia Group, mentioned Nvidia has possible made extra progress with the U.S. authorities than with China amid ongoing tensions over semiconductor export controls.

U.S.-China attain one-year commerce truce. If the most recent U.S.-China commerce deal is finalized, tariffs are anticipated to remain decrease, and large-scale disruptions to uncommon earths commerce are unlikely over the subsequent 12 months.

Nvidia in China. Because the chipmaker stays largely locked out of a $50 billion market, CEO Jensen Huang on Friday acknowledged that “China does not need H20 or any American chips.”

China’s manufacturing unit exercise slumps. The official buying managers’ index and its non-public sector counterpart each confirmed a drop in manufacturing in October from September amid U.S. commerce tensions.

Chinese language markets rose 0.46%, defying a broader regional decline as buyers pulled again from AI-related shares.

The Hold Seng Index was little modified, whereas the CSI 300 has gained practically 18% to date this 12 months.

The offshore Chinese language yuan final traded at 7.1307 in opposition to the greenback.

— Lee Ying Shan

Nov. 5 – 10: China Worldwide Import Expo in Shanghai

Nov. 6 – 9: China’s “Six Little Dragons” AI startups to carry a roundtable throughout the World Web Convention in Wuzhen

Nov. 7: Exports, Imports for October

Nov. 9: CPI, PPI for October