Representatives from China’s Liaison Office and other officials have been frequent guests at the city’s crypto gatherings over the past months, swapping business cards and WeChat details, said people familiar with the matter, who asked not to be named discussing private information. The encounters have been friendly, with officials checking on developments, asking for reports and in some cases making follow-up calls, the people said. The Liaison Office, the top mainland body based in Hong Kong, didn’t respond to a request for comment.

Local crypto operators say their presence is clearing up any doubts about Beijing’s attitude toward Hong Kong’s efforts to become a crypto hub. The low-key support shows that officials are keen on using the laissez-faire city as a testing ground for digital assets as they keep a tight rein on any such activity on the mainland.

Mainland and overseas firms are taking the cue, pushing to register their businesses and planning a return to the Chinese territory 15 months after Beijing slapped a ban on the industry and forced many to set up shop abroad.

“As long as one doesn’t violate the bottom-line, to not threaten financial stability in China, Hong Kong is free to explore its own pursuit under ‘One Country, Two Systems,’” said Nick Chan, a National People’s Congress member and a lawyer who advises on cyber-security and digital assets.

The city on Monday outlined a further opening to crypto, releasing a plan to let retail investors trade digital tokens like Bitcoin and Ether. Individual investors would be allowed to trade larger coins on exchanges licensed by the Securities & Futures Commission, providing safeguards such as knowledge tests, risk profiles and reasonable limits on allowable exposure are put in place, the regulator said in a consultation paper.

China started its crackdown on crypto in 2017 and banned trading in 2021, leading some of its biggest homegrown names, such as Binance and Tron, to exit the country. Only recently did the world’s second-largest economy ease its grip on the development of the blockchain technology behind these digital assets, allowing some NFTs to be developed.

For now, there is little indication that Beijing will relax its own ban amid concern about consumer protection, the use of crypto to evade capital controls, and environmental damage from the energy consumed by Bitcoin mining.

The mainland representatives are reporting their findings in Hong Kong to superiors in mainland China, although the purpose of those reports isn’t clear, the people said.

“As long as it’s still under the Party’s control, there will be no U-turn on China’s crypto policy,” said He Yifan, founder and CEO of state-backed blockchain firm Red Date Technology. “It does no good to the real economy.”

In recent months, Chinese officials have been explicit in their endorsement of Hong Kong’s ambitions to become a fintech hub. Yi Gang, governor of the People’s Bank of China, delivered addresses at key Hong Kong events on China’s development of its central bank digital currency and close cooperation with the Hong Kong Monetary Authority.

Hong Kong’s renewed interest in crypto came at a tumultuous time as industry stalwart FTX collapsed, and contrasts with tightening rules in rival Singapore. For Hong Kong to succeed in its pursuit, it has to woo back the Chinese crypto entrepreneurs who over the past few years decamped to Singapore and beyond while awaiting clearer regulations in Hong Kong.

One who’s plotting a return is the founder of Tron, Justin Sun, who said on Twitter last month that he would relocate to Hong Kong to be “closer to the action.” Earlier this month he said digital asset exchange Huobi plans to expand its operations in the city.

“The changing attitude of the Hong Kong SAR government towards crypto signals a nod from the Chinese central government granting pilot status to HK for some forward-looking experiments on how can crypto be best adopted and localized for the huge Chinese market at large,” Sun said in a January interview. “I’m very bullish on the outlook for crypto in the greater China region for the next decade.”

Less established firms are also flocking to the city.

About 70 percent of the 300 Web3 firms that have signed up for Hong Kong’s accelerator program G-Rocket were founded by overseas Chinese entrepreneurs, while roughly one-quarter were based in mainland China, said co-founder Caspar Wong.

“We are the window of China, and yet we have globally adopted legislation, practices, and economic principles,” said Duncan Chiu, a Hong Kong lawmaker of technology industry.

“There will always be competition from other places like Singapore and Dubai,” he said. “It will only push us to do more and the most important thing is the balance on how to regulate, license the industry and yet not to over-regulate it so that it hinders innovation.”

Hong Kong’s new licensing regime for virtual asset exchanges will take effect from June, although applicants are expecting to face a longer wait to gain formal licenses.

The broader finance industry is keeping a close eye on the developments, but caution that entry might be tough. Only a few firms will likely satisfy demands on risk management controls, systems, product knowledge and capital quality to warrant a license, said Tan Yueheng, chairman of BOCOM International and permanent honorary chairman of the Chinese Securities Association of Hong Kong.