We’re backing Hong Kong’s Web3 transition

Volatility in crypto markets may come and go, but development of the underlying technology continues. In Hong Kong, the blockchain community is still focused on the path ahead for DLT and related tech, with Web3 developments showing promising indications of what it can achieve. Even within our community itself, we’ve noticed an increased interest and chatter - mostly positive, about all the recent innovation and development of the Web3 space in Hong Kong.

On 9 April Financial Secretary Paul Chan announced that Hong Kong’s 2023-24 city budget will include HK$ 50 million (US$6.4 million) dedicated to the further development of Web3 technology as well as supporting crypto regulation in the territory. Majority of the proposed regulation is focused on financial security: risk management, consumer education, and anti-money laundering (AML) measures – all of which could enhance the attractiveness of DeFi products and services for consumers. We expect more of a breakdown as to how the budget will be divided up within the sector.

This move follows the Hong Kong Securities and Futures Commission (SFC)’s proposal on 20 February to introduce crypto exchange regulation. SFC official Cai Zhonghui announced that DeFi would benefit from regulation in Hong Kong, including the requirement that decentralised exchanges (DEXes) apply for licences.

While the uncertainty makes it difficult for platforms, we do know the likes such as OpenSwap have restricted access for those logging in from Hong Kong as a precautionary measure. While OAX supports government and regulatory oversight, we still hope that the industry is given room to develop. The DeFi space is expansive, and to reduce it simply to the understanding of DEXes would be a disservice to the industry, especially while the city is hoping to grow its Web3 development.

These proposals leave much open to be finalised – but is a clear statement of intent. And the rest of the world is showing signs of following Hong Kong’s lead, both by committing development funding, and proposing appropriate regulation.

For example, in early April the U.S. Treasury Department recommended that DeFi services should comply with anti-money laundering (AML) and terrorist financing standards. France’s central bank, the Banque de France, advocated that DeFi protocols should incorporate and certify the security of their smart contracts. And the G20’s Financial Stability Board (FSB) recently announced that it would examine ways of addressing areas of vulnerability and opacity that hold back DeFi progress.

In Europe public and private funding for blockchain, DeFi, NFT and cryptocurrency development topped US$10.5 billion last year. In February, Abu Dhabi’s Hub71 initiative committed US$ 2 billion to support Web3 start-ups.

But when it comes to intellectual capital, Hong Kong continues to forge ahead. Last month it hosted one of the largest crypto-focused events ever in the territory: the Web3 Festival from 12 - 15 April hosted more than 300 speakers and 80 projects. Sessions covered the spectrum of new developments, use cases and ideas for the group of technologies that make up the Web3 proposition.

These initiatives are timely: global corporations are moving fast to build Web3 offerings in an effort to stake their claim in the new environment to come. Fast-food brands, leveraging the success of their existing mobile apps, have gamified their customer interactions and launched NFTs: McDonald’s, Burger King and Taco Bell have all distributed limited-edition digital collectibles.

Designer fashion brand Louis Vuitton has developed a metaverse game for consumers, who can collect digital artworks, while Prada has announced their digital collection alongside its own Discord server, Prada Crypted.

In China, Tencent invested in a game focused layer 2 scaling platform: Immutable X while TikTok worked with Immutable X to launch their collection, Tiktok Top Moments. Last month, Bilibili launched a digital collectibles called Cheers UP and added an NFT tab to its app so users can connect to their Metamask wallets.

At OAX, we continue to pursue practical consumer-focused solutions. In January we released Notifs, an app that enables digital asset owners to pull together all of their portfolio activities into a customised mobile dashboard that gives a unified view of real-time events from transactions to price-change notifications.

The emphasis is on convenience when it comes to staying on top of digital assets: They are able to create aggregated portfolio views and tailor how they would like to be updated. Instead of trying to keep track of scattered wallets on different chains, they can create one unified real-time view.

Our roll-out of Notifs is just one indication of Hong Kong’s dynamic digital ecosystem in action. With support and investment powering innovation, our dynamic tech community is walking the talk by making digital assets more accessible to the masses – and the Web3 transition is moving ahead.