Hong Kong Embraces Web3 Despite Crypto Market Volatility

In a recent blog post, Paul Chan, the financial secretary of Hong Kong, emphasized the need for the city to push forward with Web3 technology, despite the ongoing volatility in the crypto market. Chan proposed a strategy that focuses on proper regulation and promoting development to facilitate the steady growth of Web3. He noted that Hong Kong plans to prioritize financial security, prevent systemic risks, and focus on investor education and protection, as well as measures around anti-money laundering.

The government of Hong Kong first floated the idea of introducing a bill to regulate crypto in October last year. By February 2023, the Securities and Futures Commission (SFC), the local securities regulator, released a proposal for a regime for cryptocurrency exchanges set to take effect in June. The industry has faced a bear market and setbacks with exchange collapses and ongoing scrutiny from regulators. However, Chan compared the current situation to that of the early 2000s internet bubble, where the market participants became much calmer after the bubble burst.

Chan also emphasized the need for market participants to focus on competing in technological innovation, practical application, and value creation, contributing to improving the quality of the real economy. He called for the deeper development of blockchain technology, which can find wider application scenarios and solve more existing problems due to its characteristics and advantages of transparency, efficiency, security, disintermediation, de-platformization, and low cost.

Hong Kong’s approach to crypto regulation is in stark contrast to that of the United States, which has adopted a more hardline response to the industry. The difference in regulatory approaches has led to speculation that the crypto industry’s “center of gravity” will shift to Hong Kong. Cryptocurrency exchange Gate.io has already announced plans to launch a presence in Hong Kong following the local government’s planned 50 million Hong Kong dollar ($6.4 million) cash injection into Web3 in the city’s 2023-24 budget.

In a March 20 speech in Hong Kong, the secretary for financial services and the treasury, Christian Hui, stated that Hong Kong has been attracting “interest” from various crypto firms worldwide since October 2022. Chan concluded his post by acknowledging that the road of innovation and technological change has never been smooth sailing. He emphasized that even if the development direction is locked, the actual path has to be worked out step by step. He called for persistence in trying to find new solutions and new ways out to facilitate the steady growth of Web3 in Hong Kong.