Author: Oliver, Mars Finance
Midnight Announcement and That $5000 Bullish Candle
At midnight on July 11, 2025, a seemingly ordinary official WeChat post triggered a storm in the cryptocurrency community in China and around the world. The publisher was the Shanghai State-owned Assets Supervision and Administration Commission (referred to as "Shanghai SASAC"), and the content was about a central group study meeting held by its party committee on July 10, focusing on "the development trends and response strategies of cryptocurrencies and stablecoins."
As soon as the news broke, the market responded in the most direct and primal way. In the following hours, the price of Bitcoin soared as if it had broken free from shackles, skyrocketing from around $111,300 to over $118,400, pulling off a massive bullish candle exceeding $7000 in a single day, setting a new historical high. Accompanying the price surge was a dramatic increase in trading volume, clearly indicating that a powerful buying force was instantly activated. The most sensitive aspect of the cryptocurrency market is always that nerve called "policy sentiment."
This raises a core question: why could an internal study meeting of a local state-owned asset management department trigger such violent price fluctuations in top global crypto assets? What did the "smart money" in the market read between the lines of this brief announcement? The answer lies not on the surface of the text but is deeply rooted in China's complex ten-year attitude towards cryptocurrencies, Hong Kong's unique role as a financial special zone, and the grand narrative of the future of digital finance. What the market is trading is not the meeting itself but the potential strategic shift it signifies.
A Glimpse Through the Keyhole: A Carefully Calculated Embrace, Not a Full Opening
To understand the market's excitement, one must delve into the specific content leaked from this study meeting. The meeting invited Li Mingliang, the chief expert from the Guotai Junan Policy and Industry Research Institute, to give a special report. His proposed ideas were far from simple "learning" or "understanding," but rather a carefully considered and highly operable strategic framework.
The most significant suggestion in the report was to construct a dual-currency system for a Renminbi stablecoin: CNYC (onshore Renminbi stablecoin) and CNHC (offshore Renminbi stablecoin). This is an extremely clever design. CNHC aims to become a stablecoin that circulates freely in the global crypto market, anchored to the offshore Renminbi, directly competing with dollar stablecoins like USDT and USDC. Meanwhile, CNYC could be applied in special regulatory areas like the Shanghai Free Trade Zone, serving specific cross-border trade and financial scenarios. This "dual-track" design aims to achieve a perfect balance between open competition and risk isolation.
More critically, the report explicitly proposed achieving compliance through "electronic fencing" technology. This term is the key to understanding China's new strategy. It signifies that this is by no means an unconditional surrender to the crypto world but a premeditated, self-directed "reconciliation." "Electronic fencing" implies a licensed or closely monitored system, where transactions will be restricted to specific users, jurisdictions, or application scenarios, effectively preventing the capital outflow and financial risk transmission that Beijing fears the most.
The strategic goal behind all this directly points to the emphasis on "integration of production and data" highlighted by He Qing, the director of Shanghai SASAC, in his concluding remarks, which aims to explore the application of blockchain technology in "cross-border trade, supply chain finance, and asset digitization." This aligns perfectly with the report's goal for stablecoins to support "RWA (real-world asset) settlement and the internationalization of the Renminbi." It clearly indicates that Shanghai's exploration is driven by national-level industrial upgrading and currency internationalization strategies, rather than catering to speculative demands from the public. It is seeking a compliant channel for China's vast assets to enter the global digital value network and is paving a new path for the Renminbi to bypass the traditional SWIFT system.
The Great Wall of Policy: A Contradictory History and Stubborn Reality
The positive signal released by Shanghai is so shocking precisely because it stands in stark contrast to the harsh regulatory history of mainland China over the past decade. Only by reviewing this contradictory and contentious history can one understand the profound implications that the current shift may hold.
China's crypto regulation has roughly gone through three stages. The first stage began in 2013 when the central bank and five ministries issued documents prohibiting financial institutions from participating in Bitcoin activities, defining it as a "specific virtual commodity" rather than currency. The second stage peaked in 2017 when regulatory authorities classified ICOs (Initial Coin Offerings) as "illegal public financing" and comprehensively banned domestic cryptocurrency exchanges with a thunderous momentum. The official reason given was to prevent financial risks and fraud, with a former central bank official pointing out that over 90% of ICO projects in the market were suspected of fraud.
The third stage, the most severe, arrived in 2021. The People's Bank of China and ten ministries jointly issued a notice categorizing virtual currency-related business activities as "illegal financial activities" and launched a comprehensive crackdown on cryptocurrency "mining." The official motivations behind this move were multiple: one was the enormous energy consumption contradicting China's "carbon peak and carbon neutrality" goals; the other was the rampant illegal activities such as money laundering, gambling, and capital flight conducted through virtual currencies. Blockchain analysis firm Chainalysis estimated in a report that in 2020 alone, approximately $50 billion worth of crypto assets flowed from East Asia (mainly referring to China) overseas.
However, the harsh bans did not eradicate demand; instead, they gave rise to a large and hidden underground market. As Chainalysis pointed out in a report in early 2024, even under the most severe crackdown, grassroots adoption of cryptocurrencies in China remained among the highest in the world. After exchanges were banned, users quickly turned to more decentralized over-the-counter (OTC) platforms and peer-to-peer networks. Especially during periods of increased economic uncertainty, there were significant signs of increased funds flowing into cryptocurrencies through OTC channels. Ben Charoenwong, a finance professor at INSEAD, commented, "In certain environments, cryptocurrencies are seen by some as a hedging tool and a means of asset preservation."
This reveals a profound policy paradox: the stringent bans aimed at strengthening financial control have, objectively, pushed related activities into harder-to-track gray areas, thereby somewhat undermining the effectiveness of regulation. Perhaps it is the recognition of this stubborn reality that has prompted decision-makers to begin contemplating a new strategy—rather than block, it is better to guide and establish a more attractive compliant channel that they can control.
Hong Kong's Changes: One Country, Two "Cryptos"
While mainland China has erected high walls against cryptocurrencies, just a river away, Hong Kong has rolled out the red carpet. This stark contrast is not coincidental but rather a meticulously planned strategic layout under the "one country, two systems" framework. Hong Kong is playing a key role as a testing ground for China's crypto strategy and an international interface.
In the past two years, Hong Kong has rapidly built a comprehensive regulatory system for digital assets. It has introduced a mandatory licensing system for virtual asset service providers (VASPs) and imposed strict requirements for anti-money laundering (AML) and investor protection comparable to traditional financial institutions. In June 2025, Hong Kong officially announced the "Stablecoin Issuer Ordinance Draft" and plans to implement it on August 1, paving the legal path for compliant stablecoin issuance. More significantly, in February 2025, the world's most influential cryptocurrency summit, Consensus, chose to be held in Hong Kong for the first time outside North America after more than a decade, attracting nearly ten thousand practitioners from around the globe, with Hong Kong's Financial Secretary Paul Chan attending to declare, "Hong Kong is back, and Web3 is back."
The openness of Hong Kong and the exploration of Shanghai form a perfect strategic synergy. The CNHC (offshore Renminbi stablecoin) envisioned by Shanghai is undoubtedly best suited for issuance and experimentation in Hong Kong. By establishing a licensed institution regulated by the Hong Kong Monetary Authority in Hong Kong, CNHC can compete with dollar stablecoins in the global market, while any potential financial risks can be absorbed by Hong Kong's mature regulatory system and independent financial firewall, without directly impacting the mainland. This is the essence of the "one country, two 'cryptos'" strategy. It allows China to simultaneously achieve two seemingly contradictory goals: maintaining stability in the financial system and strict capital controls in the mainland, while actively participating in global digital finance innovation and competition in Hong Kong, vying for discourse power in the next generation of the internet.
The Game of Top-Level Design: Another Voice Beyond the Shanghai-Hong Kong Model
However, the "sandbox" model of Shanghai-Hong Kong linkage, while clever and prudent, has also sparked deeper strategic reflections. One viewpoint suggests that this approach, which focuses on offshore markets and limited pilots, may not fully leverage China's core scale advantages as the world's second-largest economy. In the all-encompassing digital finance competition with the United States, relying solely on Hong Kong as a "special zone" as a window may not be sufficient to form overwhelming competitiveness.
This voice calls for China to conduct a fundamental sorting and definition of the virtual capital market from a broader national perspective. The core lies in recognizing and distinguishing between two fundamentally different financial needs: "investment" and "speculation." Stablecoins, in this view, are essentially closer to investment chips in a speculative financial market, primarily serving high-frequency trading and risk hedging rather than direct payment or value storage. Avoiding their "speculative" nature is akin to covering one's ears while stealing a bell.
Based on this understanding, a bolder blueprint emerges. In this vision, Shanghai and Hong Kong will play distinctly different yet complementary roles. Shanghai, as China's economic heart, should focus on building the "investment" financial virtual capital market. Its core task is to vigorously promote the digital Renminbi (e-CNY), serving the digital transformation of the real economy, providing a financing platform based on real assets and future rights for a vast number of enterprises, families, and individuals, completely separating the pure financial speculation function. Meanwhile, Hong Kong should be developed into a strictly regulated, international "speculative" financial virtual capital market. Here, compliant Renminbi stablecoins will serve as one of the core trading mediums, directly competing with dollar stablecoins and providing a credible "Renminbi solution" for the global virtual economy.
To realize this grand blueprint, infrastructure must come first. The idea of establishing a "China Digital Network" company, similar to the "State Grid," has emerged. This company would be responsible for creating a world-class blockchain underlying platform, ensuring convenient, secure, efficient, and low-cost transactions. At the same time, clarifying the role of state-owned financial capital is also crucial. They should not participate in market competition as ordinary players but should undertake the mission of a "national team," focusing on executing strategic investments that reflect national will, such as saturating angel investments in key technology sectors or acting as the ultimate stabilizer in times of market failure.
Two Futures in the New Chess Game
When we weave together all the clues and viewpoints, the significance of this study meeting by the Shanghai SASAC transcends a single policy signal. It resembles a signpost at a crossroads, pointing to two possible futures for China's digital finance strategy.
The first future is the gradual path represented by the current Shanghai-Hong Kong linkage. It is cautious and pragmatic, carefully extending its feelers through "electronic fencing" and offshore test fields, attempting to carve out a new path for Renminbi internationalization and RWA without altering the existing domestic financial landscape. This is a "crossing the river by feeling the stones" wisdom, aiming to accumulate small victories for a larger triumph.
The second future, however, is a more profound, top-down systemic transformation. It requires decision-makers to confront the dual nature of virtual capital, strategically dividing the market into "investment" and "speculation," allowing Shanghai and Hong Kong to perform their respective roles, supplemented by national-level digital infrastructure construction. This is undoubtedly a larger game, intending to achieve its goals in one fell swoop, not only to participate in the game but also to reshape the rules of the game.
Therefore, the $7000 bullish candle in today's market embodies emotions far more complex than imagined. It is not only an instant pricing of the signal of "openness" but also a fierce game and imagination regarding which path China will choose in the future. Traders are betting on the possibility of the world's second-largest economy transitioning from a "strict regulator" in the crypto world to a "controlled participant," and ultimately becoming a "rule maker." The midnight announcement may not just be a starting gun but rather the opening bell for this grand chess game concerning the fate of China's digital finance.
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