Opportunities and Challenges for Hong Kong to Become a Global Web3 Hub

Recently, the Hong Kong Monetary Authority released a document regarding the regulation of stablecoin-related activities, which aligns with Hong Kong's strategy to connect the new generation of digital assets with its mature traditional financial ecosystem. As a global financial center committed to enhancing regulation, Hong Kong has made steady progress in establishing a clear and comprehensive framework. However, this alone is not sufficient for Hong Kong to stand out in the competition for a global Web3 hub.

Hong Kong was once home to many well-known cryptocurrency exchanges and had the most Bitcoin ATMs in Asia. However, since 2019, due to the pandemic and cautious policies, Hong Kong's position in the global cryptocurrency industry has declined. Nevertheless, missing out on the frenzy and boom-bust cycles of the cryptocurrency industry may not be a bad thing. Today, the cryptocurrency industry is entering a reset mode, which provides a good opportunity for Hong Kong to redefine itself as a Web3 hub.

This year, we are seeing more signs that the Chinese government views blockchain and digital assets as a potential source of economic growth. Hong Kong has received support to explore a path of innovation and global integration that is not restricted by mainland policies. Meanwhile, with some cryptocurrency platforms collapsing, the U.S. and Europe are tightening regulations, which may prompt more digital asset-related activities to shift eastward.

Hong Kong, as one of the world's most powerful capital markets, has a comprehensive financial regulatory framework and top-notch financial and technical talent. Its mature capital market makes Hong Kong an ideal place to create real-world blockchain applications, especially in the area of asset tokenization. The Hong Kong government is committed to creating a favorable environment for collaboration between the public and private sectors, which will help digital assets better integrate into the real economy.

In addition, Hong Kong can leverage the resources of technology entrepreneurs from mainland China. Many Chinese internet giants listed in Hong Kong have begun to venture into the digital asset and Web3 space, and Hong Kong may become an ideal platform for their development.

However, Hong Kong also faces challenges in becoming a Web3 hub. Firstly, the existing regulatory framework may not be suitable for the rapidly developing digital assets and cutting-edge technologies. Secondly, Hong Kong needs to develop differentiated technology infrastructure for digital assets to bridge the gap in technological resources with other hubs.

The security of digital assets is different from traditional assets, requiring advanced technologies such as multi-party computation to ensure that asset owners have complete control or shared management over their assets. As institutional business may become more promising in 2023, Hong Kong needs to develop Web3 infrastructure that meets institutional needs, including custody platforms, institutional wallets, and digital security solutions.

In summary, Hong Kong is in a favorable position to learn from the experiences and lessons of the cryptocurrency industry over the past few years, to establish a Web3 hub with an appropriate regulatory environment and technological infrastructure, effectively managing risks while promoting innovation.