Trump is diving into crypto headfirst. Has China missed the boat?

During his first term in office, US President Donald Trump decried the utility of bitcoin and other cryptocurrencies, saying their value was based on “thin air”.
But since his campaign for a second term – which put him back in the White House in January – he has taken on a decidedly different tone.
Trump gathered CEOs and investors for a first-ever White House summit dedicated to digital assets on Friday, where he stated the country would be the “crypto capital of the world”.
The shift began to take shape during Trump’s 2024 presidential campaign, when he said the US must embrace cryptocurrency to avoid letting China “dominate” the field at a bitcoin conference. The then-nominee of the Republican Party declared he would be a “crypto president”, gaining support from a growing community of enthusiasts and speculators.
“Trump’s ambition to position the US as the global crypto capital isn’t just about economic leadership – it’s also a geopolitical move,” said Matteo Giovannini, a senior finance manager at the Industrial and Commercial Bank of China.
The US president’s change in attitude towards cryptocurrency coincided with the digital asset’s upgrade in status and market size. During his first term, bitcoin and other tokens were a niche option compared to more storied investments, but by 2024 their value had ballooned, gaining traction among buyers around the world.
Trump’s summit came shortly after he signed an executive order to establish a “Strategic Bitcoin Reserve and United States Digital Asset Stockpile”, an official allocation of cryptocurrencies already held by the federal government following asset forfeitures in criminal and civil cases.
“By embracing cryptocurrencies and fostering US dollar-backed ‘stablecoins’, the US can embed its currency even deeper into the global financial system, countering efforts by China, Russia and others to build alternatives to the dollar,” said Giovannini, also a non-resident associate fellow at the Centre for China and Globalization think tank.
He added that by fostering innovation, attracting cryptocurrency firms and integrating blockchain technology into financial systems, the US may set global standards for regulation and trading of the assets.
Trump said the “status of the dollar will remain stable for a long time” at the summit on Friday, as US-held digital assets form what he expects to become a model for economic growth.
“China is pushing forward and very strongly as usual, but we’re way in the lead, as we are in [artificial intelligence] and other things, and we want to stay there,” Trump added.
Cryptocurrency trading emerged with the birth of bitcoin in 2008, the first decentralised digital asset not controlled by any government or central bank. Unlike traditional assets, which rely on intermediaries, crypto assets operate on blockchain – a tamper-proof, transparent ledger that records transactions without centralised oversight.
Until July 2012, the US dollar unit price of bitcoin remained in the single digits before gradually climbing into the four-digit range. By the end of 2017, the cryptocurrency had reached nearly US$13,900 in value per unit.
Since September 2020, that figure has surged eightfold on the back of relaxed regulation and an inflow of passive investments from exchange-traded funds such as BlackRock’s iShares Bitcoin Trust. Despite frequent ups and downs, bitcoin’s unit price stood at US$80,419 as of Tuesday afternoon for a year-on-year gain of about 18 per cent.
In the days before Trump’s inauguration, the president-elect’s new-found enthusiasm extended to his personal affairs. He launched his own cryptocurrency, the “Trumpcoin” or $Trump a few days before taking office, and First Lady Melania Trump announced her $Melania coin not long after.
Global holdings of US dollars – already used for the vast majority of international trade – would expand with a heightening of cryptocurrency swaps in the United States, said Winston Ma, an adjunct professor on the digital economy at New York University. Investors around the world would have to use greenbacks to buy the growing stock of digital assets. Unlike the US dollar, China’s yuan is not freely exchangeable.
“Trump’s plan to make the US a cryptocurrency hub would be a significant wake-up call to China by shifting leadership further to the US, fostering economic integration of cryptocurrencies and promoting decentralised financial systems outside China’s control,” said Han Shen Lin, China country director at The Asia Group consulting firm.
Other countries – not only China – must develop “more open regulatory frameworks to attract capital flows” if they hope to keep pace with US ambitions under Trump, Han said.
“As a global crypto hub, the US would further consolidate economic dominance by reinforcing USD supremacy, attracting capital flows and leading the next wave of innovation,” he added.
The liquidity is already in USD, so it’s going to be hard to compete
Alicia Garcia-Herrero, Natixis
By comparison, China – which has developed its own digital currency backed by the central bank, the e-CNY, and endeavoured to widen offshore use of the yuan as an antidote to the US dollar amid sprawling trade disputes – has so far stuck to its hardline stance on the alternative assets.
Mass-market cryptocurrency trading has been effectively banned in the country since 2017, when it outlawed initial coin offerings. These events, similar to initial public offerings, attempt to raise capital by debuting new cryptocurrencies to investors.
In 2021, Beijing imposed a blanket ban on bitcoin mining – the energy-consuming process by which high-intensity computing generates the assets – and declared all cryptocurrency-related businesses illegal.
Authorities in China view cryptocurrencies as a threat to financial stability that could raise risks of capital flight and be used to mask criminal activity.
Despite its tough treatment of cryptocurrencies, the Chinese government does support the development of blockchain, adopting the technology for a multitude of applications.
A cryptocurrency reserve in the United States would cause “concern for China because it attracts capital outflow into the US”, said Alicia Garcia-Herrero, chief economist for Asia-Pacific at the French investment bank Natixis.
“I can’t imagine [Chinese] stablecoins in other currencies in a big way because the liquidity is already in USD, so it’s going to be hard to compete,” she said.
Analysts said China may respond by doing more with its state-backed digital currency and blockchain platforms.
Beijing could, for instance, offer other countries e-CNY accounts set up with the People’s Bank of China to settle payments quickly without intermediaries, said Ludovic Subran, Munich-based chief economist with insurance giant Allianz.
Use of the yuan in international settlements has gained traction in places such as Singapore, Russia and the Gulf states of the Middle East.
China will not retool its position on cryptocurrency trading in the short term, said Jack Poon, a fintech and entrepreneurship professor of practice at Hong Kong Polytechnic University.
But as Chinese investors search for workarounds through channels such as offshore platforms, calls are growing louder for Beijing to relax its restrictions.
With the US becoming more of a threat, China could push for alliances with other countries to promote a “blockchain ecosystem” tied to the e-CNY rather than to dollar-dominated stablecoins, Giovannini said.
As possible allies for joint use of the Chinese blockchain, he pointed to Brazil, India, Russia, South Africa – members of the Brics bloc of developing nations – and the scores of others that have taken part in China’s 12-year-old Belt and Road Initiative for infrastructure-based regional connectivity.
Hong Kong is such a unique and interesting place going forward … It’s a place that’s testing both sides
Winston Ma, New York University
Crackdowns aside, mainland Chinese officials have let Hong Kong build out a cryptocurrency ecosystem consistent with those of Western economies, including trade in the bitcoin and ethereum tokens.
For the moment, said Ma of New York University, Beijing’s policymakers are likely to use Hong Kong as an experimental “sandbox” for testing methods to resist US dollar dominance in cryptocurrencies.
Last month, Hong Kong’s Securities and Futures Commission unveiled 12 initiatives designed to “future-proof” its virtual asset ecosystem, including an expansion of product offerings and a means to bridge cryptocurrency with traditional finance.
The city is likely to issue more licences for retail trade in cryptocurrency while bolstering support for the e-CNY, Ma said. Hong Kong has granted 10 virtual asset trading platform licences so far, and hosts Asia’s first spot cryptocurrency exchange-traded fund.
“Hong Kong is such a unique and interesting place going forward,” he said. “It’s a place that’s testing both sides.”
The metropolis’s status as a special administrative region of China with its own laws and a degree of market access has brought it trust among international investors.
“Hong Kong could carve out a niche by facilitating yuan-based digital finance innovations and attracting Asian digital assets firms seeking a friendly regulatory environment,” Giovannini said.
The mainland’s high-net-worth individuals and citizens with existing positions in cryptocurrency funds would be able to invest through Hong Kong, said Charles Chang, a professor of finance at Fudan University. But to manage outflows, he said, not everyone will get access.
A spokesman for Hong Kong’s Financial Services and the Treasury Bureau said the department will soon release a policy statement encouraging the “innovation and application of virtual asset technologies” for local and international companies.
“Noting the fast-evolving nature of the virtual asset market, we will continue to keep abreast of the relevant developments in other jurisdictions, with a view to ensuring that our regulatory framework would remain robust and facilitating, so as to provide adequate investor protection while enabling sustainable market development and innovation,” the spokesman said.
China’s role in the digital currency space would grow if the new US cryptocurrency reserve clashes with Federal Reserve monetary policy or leads to a weakening of the US dollar to entice more onshoring, said Subran of Allianz.
Uncertainty around the currency, he added, would push some countries toward non-US dollar stablecoins to ensure their traders can make payments.
Trump’s attention to cryptocurrency will challenge China to find a balance, said Brian Wong, a fellow at the Centre on Contemporary China and the World at the University of Hong Kong.
“The Chinese bureaucracy is cognisant of the immense potential in cryptocurrencies as a pillar of its broader grand strategy of destabilising a USD-driven global financial order,” Wong said.
“In short, China wants crypto to rise, is likely keen on having a modicum of exposure to crypto, yet is also wary of the risks and challenges that come with excess proliferation. What to do?”
Additional reporting by Mia Nulimaimaiti