Rumblings of a crypto race

This report is from this week’s CNBC The China Connection newsletter, bringing you news and analysis on what’s driving the world’s second-largest economy. You can subscribe here.

US AI competition with China looms for cryptocurrencies.

At least that’s what US President Donald Trump suggested following his meeting last Thursday with Chinese President Xi Jinping, a trade negotiation closely followed around the world.

“I want to make crypto great for America,” Trump told CBS News. “The same way we’re number one with AI, we’re number one with crypto. And I want to keep it that way.”

“I don’t want China or anyone else to take it away from us,” he said.

Whether Trump actually views Beijing as a serious threat or not, his remarks come as China sends new signals about its crypto ambitions. Beijing has banned domestic crypto transactions since 2021, while Hong Kong, a special administrative region of China, maintains a managed system that encourages the development of digital assets.

On Monday, Hong Kong further eased its restrictions, allowing its licensed virtual asset trading platforms to directly connect to global crypto exchanges and list new digital assets and Hong Kong-regulated stablecoins, waiving the need for a 12-month history.

The announcement coincided with the 10th Hong Kong state-organized FinTech Week, which opened just as the political and business spectacle in South Korea began to fade.

Hong Kong was quick to follow Washington’s lead, allowing spot tracking of exchange-traded funds. last year, and went even further by allowing ether spot ETF trading nearly three months before the US.

Bitcoin, often compared to digital gold, remains the most recognized cryptocurrency. Ether, another major digital currency in the Ethereum network, is used both for payments and as a “gas” to pay for calculations and run smart contracts on decentralized applications.

Ethereum Foundation co-executive director Tomasz K. Stańczak, speaking at a digital assets forum on the sidelines of Hong Kong FinTech Week on Sunday, noted that more than 60% of stablecoins – cryptocurrencies linked to government-issued currencies – are deployed on the Ethereum network.

Among the audience of about 300 people, nearly 70% were from traditional finance, according to Gavin Wang, chief investment officer at SNZ Holdings, a digital asset investment firm that helped organize the forum.

That’s in contrast to how such events previously attracted more software developers, said Wang, who previously worked at UBS. The forum also announced the creation of an “Ethereum Hong Kong Hub,” a collaborative workspace intended to incubate related startups, reflecting the city’s growing influence as a crypto gateway in Asia.

Even major industry players are taking note. Consensus, one of the largest global crypto conferences in North America, expanded to Hong Kong for the first time this year and plans to return in 2026.

Yet digital assets remain relatively nascent compared to traditional markets. The total value of cryptocurrencies has yet to exceed $4.5 trillion, but global stock markets are still much larger at $101.52 trillion.

Bitcoin has fallen sharply in recent weeks following concerns over escalating U.S.-China trade tensions and frothy valuations of AI stocks, briefly falling below $100,000 for the first time since late June.

“My hypothesis is that it is more or less the same group of [investors] switching between AI and crypto,” said Jason Huang, founding partner of NextGen Digital Venture (NDV), an Asia-based fund that invests in cryptocurrencies and related stocks. “Once AI cools off a bit, I think crypto will come back.”

Huang’s $100 million fund surged 375.5% in the two years through March 2025 – outperforming bitcoin by more than 60% during that period – and he is now launching a second fund. He said many of his investors were wealthy Chinese, adding that subscriptions had increased despite the recent sell-off.

According to Huang, his fund saw only a single-digit decline last month, despite the which he claimed was the biggest sell-off day for crypto, even surpassing the infamous FTX exchange collapse.

The next phase of competition may not be about the tokens themselves, but about control. Governments are increasingly keen to control the market through stablecoins backed by their own fiat currencies.

Much of the recent enthusiasm for digital assets in Hong Kong comes from their push into stablecoins this year, following the US Genius Act, which aims to support dollar-pegged stablecoins. This brings the US dollar’s competition with the Chinese yuan into the digital age.

“Both are working to expand their own use of the currency to grow their respective global user ecosystems,” said Winston Ma, an assistant professor of law at New York University Law School.

But it won’t be easy, he noted, because Beijing has yet to convince people to widely adopt the digital yuan, which is the digital currency issued by China’s central bank and designed to replace some cash transactions while allowing tighter oversight of its financial system.

China has sought to promote a digital version of its currency, the yuan, in recent years, but it has yet to break into the mainstream.

“US dollar stablecoins could experience the same thing when they start to emerge,” Ma said.

The US dollar accounted for just under half of global payments by value in September, followed by international financial messaging service SWIFT, while the Chinese yuan climbed one place to fifth with a 3.17% share.

Last week, China’s central bank governor Pan Gongsheng promoted the digital yuan, while taking a more conservative view of stablecoins than many expected, reaffirming Beijing’s long-standing restrictions on speculative trading in virtual currencies.

Nonetheless, Bitcoin blockchain data shows that China remains a major player, ranking third in global Bitcoin mining activity, behind the United States and Russia.

This is not a statistic that Trump is likely to overlook. Forbes estimates that the US president himself holds around $870 million worth of bitcoin, one of the largest personal reserves in the world.

—Anniek Bao of CNBC contributed to this report.

Carlos Gutierrez, former US Commerce Secretary, said Washington and Beijing got what they wanted from the meeting between Trump and Xi in South Korea. He added that markets would likely welcome signs that the two countries are giving each other reasons to strengthen ties.

James Kim, president and CEO of the American Chamber of Commerce in Korea, said the U.S.-China relationship is particularly important to South Korea. He added that he was satisfied with the outcome of trade negotiations between Washington and Seoul.

Xiaomeng Lu, director of geotechnology at Eurasia Group, said Nvidia has likely made more progress with the U.S. government than with China amid ongoing tensions over semiconductor export controls.

The United States and China enter into a one-year trade truce. If the latest US-China trade deal is finalized, tariffs are expected to remain low and large-scale disruptions to rare earth trade are unlikely over the next 12 months.

Nvidia in China. While the chipmaker remains largely excluded from a $50 billion market, CEO Jensen Huang acknowledged Friday that “China doesn’t want H20 or American chips.”

The activity of Chinese factories is collapsing. The official Purchasing Managers’ Index and its private sector counterpart both showed a decline in the manufacturing sector in October compared to September amid US trade tensions.

Chinese markets rose 0.46%, defying a broader regional decline as investors retreated from AI-related stocks.

The Hang Seng Index was little changed, while the CSI 300 has gained nearly 18% so far this year.

The Chinese offshore yuan last traded at 7.1307 against the dollar.

-Lee Ying Shan

November 5 – 10: China International Import Expo in Shanghai

November 6 – 9: Chinese AI startups from the “Six Little Dragons” will hold a roundtable discussion at the World Internet Conference in Wuzhen

November 7: Exports, imports for October

November 9: CPI, PPI for October