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One of the most interesting crypto story lines to emerge in 2023—though often overshadowed by the latest scandal du jour—is the reemergence of Hong Kong as a major player in the industry. The island territory was once home to a number of major crypto firms, but its appeal faded in light of harsh COVID policies and China’s crackdown on crypto that ramped up in 2018. But now things are changing again.

“More than 20 crypto and blockchain companies from mainland China, Europe, Canada, and Singapore have told the government they are planning to establish a presence in Hong Kong, while over 80 firms have expressed interest in doing so,” the Wall Street Journal reported this weekend, citing government data.

The report added that the pivot back to crypto was spurred in part by Singapore’s recent push to establish itself as a global hub for crypto assets and that Hong Kong’s efforts have gotten a recent boost from the U.S. government’s scorched-earth approach to regulating the industry. The move by Hong Kong also makes sense given the island’s history as a sophisticated nexus of trade and global finance.

As a journalist, I’m torn by these developments. On one hand, we’re watching the industry I cover flee the freedom of American shores for a place that has been suppressing free speech and persecuting booksellers. On the other, I understand why U.S. companies might wish to move there.

In recent months, the U.S. regulatory response to crypto has felt like gross overkill, and in the case of the Securities and Exchange Commission reeks of bad faith. Companies that want to play by the rules are discovering that regulators have no intention of letting them do so—or even telling them what the rules are in the first place.

And while regulators are right to be concerned by the crypto industry’s myriad frauds and other shenanigans, they risk overplaying their hand. Many countries are becoming fed up with how the U.S. has been claiming jurisdiction over the entire global financial system—not just for the purposes of crypto but for things like tax collection and military interventions as well.

In principle, I don’t object to America playing globo-cop when it comes to the world financial system. Despite its current political problems, the U.S. is still more free and democratic than most places—including Hong Kong, Dubai, and others vying to displace Wall Street as the world’s most important financial hub. Unfortunately, the U.S. government’s heavy hand when it comes to crypto and other areas of finance is only increasing the appeal of its challengers.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

DECENTRALIZED NEWS

Binance created a $1-billion “recovery fund” for the crypto industry but has distributed only a small portion of it, and last week the company transferred the remaining funds to one of its corporate wallets. (Fortune)

Bermuda is still keen to attract crypto companies despite the calamitous experience its fellow island nation, the Bahamas, had with FTX. (Bloomberg)

The small, Seattle-based exchange Bittrex shuttered its U.S. operations, citing the difficult regulatory climate in the country. (Decrypt)

The U.S. sold $216 million of Bitcoin in mid-March, the first of five sales that will dispose of 50,000 Bitcoins the feds seized from a hacker who robbed the Silk Road marketplace. (CoinDesk)

Bitcoin outperformed every other asset class in Q1, posting a 72% gain compared with Nasdaq and 7% for the S&P 500. (Bloomberg)