- The Hong Kong government competed for a large share of the Web3 investment tail.
- Hong Kong’s opportunity came as the US regulatory environment turned hostile.
With key lessons learned over the past decade, blockchain technologies, or Web3 as they are more commonly known, attempted to capture mainstream awareness in what is increasingly considered the industry’s moving decade.
The industry has evolved from the parochial attitude of asset trading to a broader scope that includes non-fungible tokens (NFTs), decentralized finance (DeFi), gaming finance (GameFi), and many more use cases that have yet to be unlocked.
Hong Kong sees Web3 potential
Unsurprisingly, regions around the world have begun aggressively seeking ways to take advantage of the tremendous growth potential that Web3 has to offer. Hong Kong could be the pioneer in the East Asian region.
Hong Kong Finance Minister Paul Chan Mo-po had high hopes for Web3, saying its decentralized technology would drive the next wave of breakthrough growth in the digital sphere.
In a blog post, the region’s chief financial officer stated that while smartphones and mobile internet were major contributors to the early growth phase of digital entertainment, major industry players were keeping a close eye on the emerging Web3 industries. These include NFTs and GameFi for the next big step.
That said, Chan acknowledged that Web3’s scope extended far beyond the narrow realm of digital entertainment.
“Web3’s core blockchain technology, with its features of disintermediation, security, transparency, immutability and low cost, can be applied in many fields such as finance, commerce, trade, supply chain management and even daily life.”
The minister’s comments came as the government of the Special Administrative Region (SAR) sought to establish Hong Kong as a global cryptocurrency hub. After following a conservative policy of banning private investors from trading on centralized crypto exchanges, the local government rolled forward in a significantly more friendly way digital asset legislation earlier this year.
As part of the new framework, the financial regulator, the Securities and Futures Commission (SFC), allowed licensed trading platforms to serve the general public apart from institutional investors. However, the platforms were instructed to adhere to an extensive set of guidelines.
The liberal framework has generated positive reactions. Earlier this month, Hong Kong issued its first retail crypto trading license to local player HashKey. OSL, another prominent digital trading platform, was cleared to open its doors to retailers around the same time.
More recently, the Hong Kong Virtual Asset Exchange (HKVAX) has received approval in principle from the SFC to conduct its crypto trading services.
Will Hong Kong Become the Global Center of Cryptos?
Finance Minister Chan recalled that the local government has been aggressively pushing Web3 technologies, citing the example of unique government-backed tokenized green bonds issued in February. In addition, he highlighted the government’s $50 million allocation to Cyberport to bolster Web3’s growth.
To the uninitiated, Cyberport is Hong Kong’s own version of Silicon Valley, albeit entirely government-run.
The government official said the investments had begun to pay off as the technology hub was home to more than 180 Web3-related companies. These include unicorns and licensed virtual asset trading platforms.
On the developments surrounding the Web3 task force, Chan said he recently chaired a meeting with the group members. The task force was established in June to promote the development of Web3 in Hong Kong. The unit consists of 15 non-official members from relevant market sectors, including key government officials and financial regulators.
Crypto is taking off in the East
Hong Kong’s aggressive effort to promote its Web3 ecosystem stood in stark contrast to mainland China’s crackdown on the industry. Recall that China instituted a complete ban on cryptocurrency trading and mining in September 2021.
However, the dragon hinted at the possibility of reopening its market to the digital asset industry.
Overall, the industry increasingly looked east for expansion opportunities as the regulatory climate in the US grew too hot to handle. Lawsuits against giants like Coinbase and Binance, as well as a skeptical view of many crypto assets, have sparked talks of moving to friendlier jurisdictions.