Rumblings of a crypto race

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

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

At least that’s what U.S. President Donald Trump suggested following his meeting last Thursday with Chinese President Xi Jinping — a trade negotiation closely watched around the world.

“I wanna 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 wanna keep it that way.”

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

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

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

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

Hong Kong has been quick to follow Washington’s lead, allowing exchange-traded funds tracking spot  last year, and went a step further by approving spot ether ETFs to trade nearly three months before the U.S. did.

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

Ethereum Foundation’s co-executive director Tomasz K. Stańczak, speaking at a digital assets forum Sunday on the sidelines of Hong Kong’s FinTech week, noted that over 60% of stablecoins —cryptocurrencies pegged to government-issued currencies— are deployed on the Ethereum network.

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

That contrasts with how such events used to attract more software developers, said Wang, who previously worked at UBS. The forum also announced an “Ethereum Hong Kong Hub,” a co-working space to incubate related startups, reflecting the city’s growing influence as Asia’s crypto gateway.

Even major industry players are taking notice. Consensus, one of the world’s biggest crypto conferences in North America, expanded to Hong Kong for the first time this year, and plans to return in 2026.

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

Bitcoin fell sharply in the last few weeks following concerns about escalating U.S.-China trade tensions and frothy AI stock valuations, briefly dipping below $100,000 for the first time since late June.

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

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

According to Huang, his fund was down only in the single digits last month, despite the , which he said was the single largest liquidation day for crypto, even surpassing the infamous FTX exchange collapse.

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

Much of the recent excitement over digital assets in Hong Kong stems from its push into stablecoins this year, following the U.S. Genius Act, which aims to support dollar-pegged stablecoins. It’s taking the U.S. dollar competition with the Chinese yuan into the digital era.

“Both are striving to expand their own currency usage to build up their respective global user ecosystem,” said Winston Ma, adjunct professor of law at the New York University School of Law.

But it won’t be easy, he pointed out, as Beijing has yet to convince individuals to adopt the digital yuan at scale, which is China’s central bank–issued digital currency designed to replace some cash transactions while allowing tighter oversight of its financial system.

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

“U.S. dollar stablecoins may experience the same when they start to emerge,” Ma said.

The U.S. dollar accounted for just under half of global payments by value in September, tracked by international financial messaging service SWIFT, while the Chinese yuan climbed one spot into fifth place 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.

Still, bitcoin blockchain data showed China remains a major player, ranking third in global bitcoin mining activity — behind the U.S. and Russia.

That’s not a statistic Trump is likely to overlook. Forbes estimates the U.S. president himself holds roughly $870 million worth of bitcoin—one of the world’s largest personal stashes.

— CNBC’s Anniek Bao contributed to this report.

Carlos Gutierrez, former U.S. Commerce Secretary, said both Washington and Beijing got what they wanted out of Trump and Xi’s meeting in South Korea. He added that markets will likely welcome signs that the two countries are giving each other reasons to strengthen ties.

James Kim, chairman and CEO of the American Chamber of Commerce in Korea, said the relationship between the United States and China is especially important for South Korea. He added that he was pleased with the outcome of the trade talks between Washington and Seoul.

Xiaomeng Lu, director of geo-technology 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.

U.S.-China reach one-year trade truce. If the latest U.S.-China trade deal is finalized, tariffs are expected to stay lower, and large-scale disruptions to rare earths trade are unlikely over the next 12 months.

Nvidia in China. As the chipmaker stays largely locked out of a $50 billion market, CEO Jensen Huang on Friday acknowledged that “China doesn’t want H20 or any American chips.”

China’s factory activity slumps. The official purchasing managers’ index and its private sector counterpart both showed a drop in manufacturing in October from September amid U.S. trade tensions.

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

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

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

— Lee Ying Shan

Nov. 5 – 10: China International Import Expo in Shanghai

Nov. 6 – 9: China’s “Six Little Dragons” AI startups to hold a roundtable during the World Internet Conference in Wuzhen

Nov. 7: Exports, Imports for October

Nov. 9: CPI, PPI for October