The Chinese special administrative region of Hong Kong is aiming to become a leading crypto hub, as the region started to promote the development of Web3. At the same time, its securities regulator has begun to actively regulate the crypto space, awarding licenses for retail crypto trading.
On June 30, the Hong Kong government announced that it established a task force that will be in charge of ethically promoting the development of Web3 in the region. The team will include 11 key government officials and 15 industry participants.
The government of Hong Kong has unveiled a task force dedicated to driving the advancement of Web3. According to a June 30 statement, the group comprises a mix of key government officials and industry participants. https://t.co/Yo9gnUquvI
— Cointelegraph (@Cointelegraph) July 2, 2023
In the following months, Hong Kong’s Securities and Futures Commission (SFC) started awarding licenses to exchanges in line with its crypto licensing regime that was established to protect investors from events like the FTX collapse.
With all the new developments happening in the region, Cointelegraph reached out to key players in Hong Kong to learn more about the state of crypto in the region and what the community can expect from Hong Kong in the near future.
More crypto events, stablecoins and tokenization of real-world assets
Animoca Brands co-founder and executive chairman Yat Siu, who was appointed to Hong Kong’s Web3 task force in July, told Cointelegraph in a statement that the community can expect an increase in “events, activities, and companies choosing Hong Kong as their Web3 headquarters.”
According to Siu, the Hong Kong FinTech Week, which is one of Asia’s largest fintech conferences, will feature various Web3 technologies. In addition, Siu also pointed out that it coincides with the first iteration of the ApeFest 2023, which is an exclusive meet-up event for Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) NFT holders. Siu explained:
“Speaking from my personal perspective, we anticipate robust support for Web3 initiatives from both the Hong Kong government and the local community, including organizations like ours.”
Meanwhile, Matthew Cheung, the chief strategy officer of the Hong Kong Virtual Asset Exchange (HKVAX), one of the first to receive in-principle approval from the SFC, also shared perspectives on the trends that may surface in the coming months.
Cheung told Cointelegraph in a statement that stablecoins and the tokenization of real-world assets have the most attention in Hong Kong. The executive anticipates that there will be a regulatory focus in such areas. “The city is poised to foster innovation, drive blockchain and crypto technology applications, and provide increased support for the digital economy,” he added.
Apart from these, both Siu and Cheung said that the trend of the SFC awarding licenses to exchanges is likely to continue in the near future. According to Siu, there has been a significant surge in applications. “The recent approvals are indicative of the Hong Kong government’s and SFC’s willingness to foster a conducive environment for Web3 projects in Hong Kong,” Siu said.
Meanwhile, Cheung said that this would lead exchanges to become more regulated. He said that the SFC’s proactive stance and transparent framework provide development opportunities for trading platforms that are compliant with the rules.
Related: Hong Kong securities regulator warns of ‘criminal’ activity by unlicensed exchanges
Crypto projects struggle to find banks in Hong Kong
On July 17, mainstream media outlet The Wall Street Journal reported that large banks are still not opening up to crypto in the region. Citing bankers, the outlet wrote that two global banks with operations within the city have still ruled out activities directly related to crypto trading.
Crypto exchanges are under pressure in the U.S. but Hong Kong’s government is welcoming them with open arms. The one snag: the city’s banks won’t take their money. https://t.co/mZcUe7uCJP
— The Wall Street Journal (@WSJ) July 19, 2023
However, according to Cheung, acquiring a license from the SFC solves this issue. He explained that the license is not only for regulatory compliance but is also for “gaining access to the banking system.” Cheung explained that:
“One of the advantages of obtaining a license is to open up the banking system, which has historically been a challenge for crypto projects. We have acknowledged similar difficulties in the past.”
Going forward, the executive believes that as regulatory support for Web3 development grows, relationships between Web3 projects and the banking system are also improving.
On June 15, the Hong Kong Monetary Authority (HKMA), the region’s central bank, put pressure on major banks like Standard Chartered and HSBC to accept exchanges as their clients. This appears to bolster the government’s willingness to support the establishment of crypto projects in the region.
According to Siu, many of their portfolio companies have been able to establish bank accounts in the region successfully. The Animoca Brands chairman shared advice that companies facing difficulties should try engaging with a local organization such as InvestHK – a government department dedicated to aiding foreign companies entering the region.
Foreign crypto projects welcome in Hong Kong
Meanwhile, Siu also added that there are numerous advantages for foreign crypto projects to established offices in Hong Kong. The executive noted that this includes access to a Web3-friendly market with clear regulations and a place that offers a “vibrant lifestyle.”
Siu said that while its proximity to China might raise concerns, it can also be viewed as an opportunity. “We believe that Hong Kong is positioned to become China’s crypto gateway, representing a substantial potential that should not be ignored,” he noted.
When asked the same question, Cheung also had similar thoughts. The executive said:
“Absolutely. Hong Kong, as an international financial center and innovation hub, offers ample opportunities for foreign crypto projects. Its legal framework, financial infrastructure, and favorable geographical position make it an attractive destination for setting up offices.”
According to Cheung, this move can potentially enable projects to collaborate with the markets and investors that are located within the Asia-Pacific region. He added that it could also help projects benefit from the financial ecosystem in Hong Kong.
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