How to View the Development of Web3.0 in Hong Kong

Xiong Dezhi

The new licensing system for Hong Kong's virtual asset trading platform will take effect on June 1st, and the Hong Kong Securities Regulatory Commission (SFC) will license cryptocurrency exchanges, allowing retail investors to trade through licensed platforms. The regulation of virtual asset trading platforms is based on the current regulations under the Securities and Futures Ordinance in Hong Kong, and is the same as the relevant regulations applicable to licensed securities firms and automated trading venues.

The Hong Kong SAR government is making every effort to build Hong Kong into a leading global center for digital assets and digital finance, striving to become a world Web3.0 (third generation internet) center. At the beginning of this year, the Hong Kong government proposed in the "Financial Budget" to promote the development of Hong Kong's Web3.0 industry and promote Hong Kong to become an international virtual asset center.

In October last year, the Hong Kong government issued a "Policy Declaration on the Development of Virtual Assets in Hong Kong", clarifying the policy guidelines formulated by the government to develop a dynamic virtual asset industry and ecosystem; Announce that Hong Kong is an international financial center with an open and inclusive attitude towards innovative individuals engaged in virtual asset business worldwide. The Hong Kong government will lead the development of Non Homogeneous Tokens (NFTs), promote the tokenization of green bonds, digital Hong Kong dollars, and other related experimental plans.

At the same time, Chinese banks are also collaborating with "licensed cryptocurrency merchants" in Hong Kong to enter the "Hong Kong currency circle" and provide cryptocurrency services.

Recently, with the collapse of some cryptocurrency friendly banks in the United States, the United States has increased its regulation of the cryptocurrency market, and Hong Kong banks have seized the opportunity to develop. HashKeyPRO, a new compliant trading platform under HashKeyGroup, a Hong Kong digital asset service provider, has established partnerships with Bank of Communications Hong Kong and Zhongan Bank, both of which serve as settlement banks and provide legal currency deposit and withdrawal services. Chinese banks have started accepting new Web3.0 clients, including cryptocurrency, blockchain, and regulatory technology companies, and providing services for cryptocurrency trading platforms licensed in Hong Kong.

On April 19th, a Hong Kong court for the first time determined that "cryptocurrency is property" and regarded cryptocurrency as an asset that can be held on trust. This is because the Hong Kong SAR government has recently vigorously promoted a friendly policy towards the cryptocurrency industry.

The "2023 Hong Kong Web3.0 Carnival" held last month attracted tens of thousands of practitioners and enthusiasts in the Web3.0 field worldwide, as well as over 300 speakers. The attendees painted a blueprint for the Web3.0 industry where all value can be tokenized. Hong Kong seems to have become the hub of Web 3.0 overnight.

At this point, Hong Kong needs to remain more rational.

From the perspective of global Web3.0 development and regulatory policies, Hong Kong has the opportunity to develop Web3.0, but promoting the development of Web3.0 is not easy to achieve in the short term. From the perspective of the development and transfer trend of blockchain and Web3.0, its focus has experienced a trend of shifting from east to west, and then from west to intermediate areas such as Hong Kong and Singapore in China.

On September 4, 2017, China introduced an ICO (Initial Token Issuance) ban, accelerating the shift of focus in the cryptocurrency market to the west. In the same year, the Chicago Mercantile Exchange (CME) in the United States launched Bitcoin futures contracts. In May 2022, cryptocurrency mining was once again banned in China and subsequently completely relocated westward. In the same year, the United States became the true cryptocurrency center through the adoption of Bitcoin Futures ETFs by the US Securities and Exchange Commission (SEC). From a technical perspective, Hong Kong and Singapore do not seem to have the core strength to truly drive the Web3.0 wave. If Hong Kong and Singapore cannot surpass Shenzhen and Silicon Valley as technological innovation centers, relying solely on policy attraction will be difficult to change the situation. The high rent in Hong Kong is also a limiting factor. At present, the East and West have only divested the riskiest trading portion of the crypto market, while China and the United States have never given up the initiative to develop Web3.0.

The continuous interest rate hikes by the Federal Reserve have dealt a blow to cryptocurrency and technology companies, leading to the collapse of many cryptocurrency ecosystems and a sharp drop in the valuation of technology companies. With the bankruptcy of some large encryption institutions and the crisis of Silicon Valley Bank, US regulatory agencies have increased their supervision of the encryption market. The stable currency (BUSD) issuer Paxos has been sued by the SEC, and the New York State Department of Financial Services (NYDFS) has demanded that it stop minting BUSD; Binance, the world's largest cryptocurrency trading platform, and its actual controller Zhao Changpeng have been investigated by the US Commodity Futures Trading Commission (CFTC). Even Coinbase, a compliant cryptocurrency trading platform based in the United States, has been hit. Taking this opportunity, it seems that the Virtual Asset Center has the opportunity to transfer to Hong Kong.

Under the wave of Web 3.0, Hong Kong should maintain its position as an international financial center. Web3.0, as a global trend in the development of the internet, is mainly related to blockchain based decentralization, cryptocurrencies, and non homogeneous tokens, and involves decentralized applications, smart contracts, digital currencies, and other encryption technologies. Unlike traditional Web 2.0, Web 3.0 has higher decentralization, transparency, and security, as well as stronger user control and data ownership. Web3.0 is expected to help Hong Kong's financial industry improve efficiency and innovate, thereby consolidating Hong Kong's position as an international financial center and competitiveness.

As an underlying value distribution system, blockchain has been vigorously developed in virtual currencies such as Bitcoin and NFT, and also implements the core concept of Web3.0 decentralization. Currently, DeFi (decentralized finance) based on blockchain technology has developed a prosperous ecosystem, forming different types of application ecosystems such as stable currency, exchange, lending, insurance, etc. Hong Kong's use of Web3.0 to transform the financial market and actively embrace financial technology, digital finance, etc. is a necessary part of the issue.

Technological innovation and application are undoubtedly the main driving force behind the development of every industrial revolution. In the era of Web 3.0, successful individuals will inevitably be able to utilize the latest digital technology to enhance productivity, competitiveness, and customer experience. The ultimate prosperity of Web3.0 will also rely on blockchain practitioners to drive technological innovation and achieve breakthroughs.

Currently, human society is undergoing a significant digital transformation. This not only requires Web3.0, but also more new technologies. If AIGC (Artificial Intelligence) represents a new social productivity in the digital era, then Web3.0 is describing a new relations of production.

A new industrial revolution and social change have quietly arrived. The trend of humanity entering the digital age is irreversible, but it will not be achieved overnight. In the process of human transformation, in addition to technological innovation, it is also necessary to build a brand new social relationship to adapt to the development of human digital homes.