Rumblings of a crypto race

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

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

At the least that is what U.S. President Donald Trump instructed following his assembly final Thursday with Chinese language President Xi Jinping — a commerce negotiation carefully watched world wide.

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

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

Whether or not Trump genuinely views Beijing as a severe risk or not, his remarks come as China sends new alerts 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 belongings.

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

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 observe Washington’s lead, permitting exchange-traded funds monitoring spot  final yr, and went a step additional by approving spot ether ETFs to commerce practically three months earlier than the U.S. did.

Bitcoin, usually likened to digital gold, stays essentially the most acknowledged cryptocurrency. Ether, one other main digital forex on the Ethereum community, is used each for funds and as “fuel” to pay for computation and run good contracts on decentralized functions.

Ethereum Basis’s co-executive director Tomasz Okay. Stańczak, talking at a digital belongings 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 folks, practically 70% got here from conventional finance, in accordance with Gavin Wang, chief funding officer at SNZ Holdings, a digital belongings funding agency that helped set up the discussion board.

That contrasts with how such occasions used to draw extra software program builders, stated Wang, who beforehand labored at UBS. The discussion board additionally introduced an “Ethereum Hong Kong Hub,” a co-working area to incubate associated startups, reflecting 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 yr, and plans to return in 2026.

Nonetheless, digital belongings stay comparatively nascent relative to conventional markets. The full 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 issues about escalating U.S.-China commerce tensions and frothy AI inventory valuations, briefly dipping under $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,” stated 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 via March 2025 — outperforming bitcoin by greater than 60% throughout that interval — and he is now launching a second fund. He stated lots of his buyers are rich Chinese language, including that subscriptions have elevated regardless of the current selloff.

In line with Huang, his fund was down solely within the single digits final month, regardless of the , which he stated was the one largest liquidation day for crypto, even surpassing the notorious FTX change collapse.

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

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

“Each are striving to develop their very own forex utilization to construct up their respective world person ecosystem,” stated Winston Ma, adjunct professor of regulation on the New York College Faculty of Legislation.

But it surely will not be straightforward, 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 forex designed to exchange some money transactions whereas permitting tighter oversight of its monetary system.

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

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

The U.S. greenback accounted for just below half of world 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 knowledge confirmed China stays a significant 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, stated each Washington and Beijing acquired what they needed out of Trump and Xi’s assembly in South Korea. He added that markets will probably welcome indicators that the 2 nations are giving one another causes to strengthen ties.

James Kim, chairman and CEO of the American Chamber of Commerce in Korea, stated the connection between the USA and China is very essential 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, stated Nvidia has probably 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 newest 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 would not need H20 or any American chips.”

China’s manufacturing unit exercise slumps. The official buying managers’ index and its personal 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 Dangle Seng Index was little modified, whereas the CSI 300 has gained practically 18% thus far this yr.

The offshore Chinese language yuan final traded at 7.1307 towards 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 through the World Web Convention in Wuzhen

Nov. 7: Exports, Imports for October

Nov. 9: CPI, PPI for October