Wu Jiezhuang Advocates for Bitcoin in Hong Kong’s Fiscal Reserves
In a bold proposal that has sparked interest, Wu Jiezhuang, a prominent figure in both the Hong Kong Legislative Council and the National Committee of the Chinese People’s Political Consultative Conference, has advocated for the inclusion of Bitcoin in Hong Kong’s fiscal reserves. This suggestion was highlighted in an interview with Wen Wei Po, a longstanding pro-Beijing publication in Hong Kong.
Proposal for Bitcoin in Fiscal Reserves
On December 30, Wu Jiezhuang emphasized the potential benefits of integrating Bitcoin into national financial reserves. He pointed out that this concept is not entirely new, as several smaller countries have already embraced Bitcoin as legal tender. Wu further elaborated that certain U.S. states have enacted legislation requiring that 10% of their reserves be allocated to Bitcoin, thus promoting a more diversified asset distribution strategy.
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Wu suggested that if the U.S. administration aggressively promoted Bitcoin’s inclusion in governmental strategic reserves, it could have a profound impact on the global financial landscape, particularly concerning traditional reserve assets. He encouraged the Hong Kong Special Administrative Region (SAR) government to explore the incorporation of digital currencies and cryptocurrencies into its financial reserves. This includes considering the use of the Exchange Fund for sustained Bitcoin acquisitions over the long term.
Hong Kong’s Approach to Cryptocurrency Investment
The SAR Government’s Treasury Bureau has responded by underscoring that Hong Kong’s foreign exchange fund is invested in a diverse array of global asset classes and markets. Although cryptocurrency is not officially a target investment for the fund, the Bureau noted that external investment managers are granted the flexibility to engage in globally diversified asset classes and markets, potentially opening the door for cryptocurrency-related investments, albeit minimally.
Regulatory Measures for Financial Security
In terms of financial security, the Bureau reaffirmed Hong Kong’s approach to regulating the crypto market based on the principle of “same business, same risk, same rules.” This regulatory framework aims to mitigate potential risks while maintaining financial security. The government is committed to enhancing the regulatory system and implementing measures to foster the growth of the local virtual asset market.
Global Implications and Concerns
Wu Jiezhuang expressed concerns regarding the potential global implications if the United States were to classify Bitcoin as a strategic reserve asset. He warned that such a move could destabilize traditional assets, leading to a ripple effect where more countries might reduce their holdings in conventional assets in favor of Bitcoin, causing a decline in traditional asset prices and shrinking government financial reserves.
He speculated that Bitcoin might eventually supplant “precious metals with low practical utility, including gold and silver,” due to its cost-effective storage and transport. Despite the lack of physical utility, Bitcoin’s ease of transfer and storage potentially offers a competitive advantage over gold, which incurs substantial storage and logistics expenses.
Growth of Bitcoin in Hong Kong’s Financial Markets
Wu noted Bitcoin’s increasing presence in the market, citing the existence of 12 Bitcoin- and Ethereum-linked ETFs on the Hong Kong Stock Exchange and the issuance of seven trading platform licenses by the Hong Kong Securities Regulatory Commission. This growth contrasts sharply with the situation a decade ago when Bitcoin’s potential was recognized by only a few. Nonetheless, Wu acknowledged the challenges posed by Bitcoin’s price volatility and relatively small market value, which remains significantly lower than that of gold.
He cautioned that Bitcoin is “not without risk,” highlighting its price swings and the anonymity of wallet holders. Consequently, Wu recommends that governments and enterprises adopt a prudent strategy, allocating only a small fraction of Bitcoin as fiscal assets to achieve a balanced risk-return profile.
Ongoing Discussions on Bitcoin’s Role in Fiscal Reserves
In a related development, Johnny Ng, another member of the Hong Kong Legislative Council, announced earlier in July plans to evaluate the potential inclusion of Bitcoin in the special administrative region’s financial reserves, marking an ongoing dialogue on this compelling issue.
As of the latest updates, Bitcoin is valued at $93,778.
