Financial firms have always flourished in Hong Kong’s favorable environment. Can it work miracles for crypto companies as well?
Your favorite China observer hasn’t written anything insightful on the Chinese cryptocurrency scene in nearly a year. The reality is that anybody who does not reside in Asia finds it challenging to fully comprehend its business, people, and general feeling because to China’s covid lockdown.
I was thus taken aback to sense the pro-crypto frenzy at Hong Kong’s “Web3 Festival” last week. The big news was the Hong Kong government’s significant policy declaration, which expressed its intention to make the island a welcoming environment for crypto firms to come and set up shop—within reason, of course. Players from CeFi, DeFI, NFTs, Protocols, and Games all gathered in Hong Kong to celebrate the crypto thaw. One of the largest conferences ever held at this location.
The “One Country, Two System” policy, which stipulates that Hong Kong is still very much a part of China, is of course included in the new laws that were released last week. But as is customary in Hong Kong, there are sometimes exceptions to the rule. While the mainland continues to prohibit cryptocurrency, Hong Kong seems to have been granted the go-ahead to publicly court—and regulate—the industry.
The differences from the US could not have been more pronounced. While Gary Gensler is taking legal action against ICO-era firms like Algorand in 2017, Hong Kong authorities dressed up and spoke on stage at the Web3 Festival to express their support for cryptocurrency and the larger digital asset market.
Following in Singapore’s footsteps, Hong Kong is relying on the emerging industry to bolster its battered economy as the west grows more hostile against cryptocurrencies. After Beijing passed the controversial National Security Law, which caused a significant outflow of foreign companies, expatriates, and rich residents, the former canton suffered in 2020.
The new accord aims to correct everything. In order to bring in additional tax money, talent, and financial activity, Hong Kong wants to entice cryptocurrency enterprises to locate there by providing clear regulatory advice on digital assets.
Both Huobi and OKX have so far stated intentions to launch branches in the area.
A spokesman from Bitget, a rising star in the CEX market, stated they too aim to follow suit in a private chat with your reporter. Many asset managers at the conference said that they were thinking about opening offices in Hong Kong because of the city’s reputation for having so many high-net-worth people.
The week-long conference heavily emphasized Centralized Exchanges. After all, the majority of CEXs in our sector are controlled by Chinese individuals, with CZ’s Binance being the biggest. It is followed in size by Star Xu’s OKX, Ben Zhou’s Bybit, Justin Sun’s Huobi, and Shawn Liiu’s Bitget.
The CEXes see creating a second office in Hong Kong as a kind of insurance policy against Singapore’s crypto environment. Singapore, which was once the crypto industry’s wild west before the LUNA and 3AC fiasco, is now beginning to exercise more caution. That gives Hong Kong a good starting point.
The majority of the founders and CeFi pioneers attended the conference. They appeared on the main platform and made lengthy speeches about the size of their compliance teams and their fervent desire to be properly regulated.
The creator of HashKey, a crypto conglomerate that runs an exchange, an investment arm, a staking firm, and other businesses, Xiao Feng, said that the Hong Kong government “is very serious about building an international digital asset center.” (It invests in Decrypt Media Inc. as well.)
One of the conference’s key organizers was Feng. HashKey and OSL were the only two cryptocurrency exchanges to get a license in November, when Hong Kong made it necessary for exchanges to have licenses. In June, the government is anticipated to provide licenses to other exchanges.
As usual, Justin Sun was the most amusing character. Before even setting foot in the city, Sun made his presence known by hand-selecting a contestant (seen below) to co-host Huobi’s beauty pageant in association with iPollo, a cryptocurrency wallet with low adoption that is also renowned for its attractive salesmen.
The new Huobi visage suddenly captured the audience’s interest far more than discussions about web3 or digital assets did.
Will they linger or leave?
One strategy for drawing in business and cryptocurrency investors is to open out to web3 enterprises. I learned that the policy’s objective is to bring web3 business to Hong Kong through ZA, a crypto-friendly neo bank that has the support of the HK government, over a private dinner with representatives from Hashkey.
Sort of. Hong Kong is making an effort to be crypto-friendly. The government wants to ensure that the sector is controlled and permitted to grow here—within reason. DeFi businesses, for instance, are subject to licensing requirements and regulations. Above all, the local administration is always aware of how Beijing will react, which will ultimately either look the other way or bring the hammer down.
In the past, Hong Kong has been a good place for financial organizations to flourish. But cryptocurrency business is a unique sort of bloom. Local communities must be innovative, technical, and most significantly, ready to advance technology. A delivery software that resembles a web page from the turn of the century is the most adored digital company in this area. Younger people in HK just don’t have access to tech renegades. Instead, they are drowning in exorbitant rent and housing costs. Finding a steady career is more important than playing the high-risk, high-reward game played, say, by startup guys in the U.S., so they can have a stable family.
I observed a lot of folks during my tour in the Chinese OG ETH community. The conference was unquestionably a celebration of Ethereum’s progress over the last three years, from the first ETH mining organizations to the most recent LSD farmers. The response was a typical quiet when your reporter questioned if any of the builders would relocate to Hong Kong.
Hong Kong will face a difficult battle in its pursuit of cryptocurrency tax revenue. Not just Singapore, but also Dubai, which recently started granting licenses to cryptocurrency exchanges, are among their adversaries. As an example, Bybit recently established its worldwide headquarters in Dubai.
But at least Hong Kong is making an effort to quickly set the ground rules—unlike in the United States. There wouldn’t be a crypto sector without it.