Hong Kong is making strides in its ambitious plans to become a regional blockchain powerhouse, recently launching a new Web3 institute to spearhead the effort. Key industry stakeholders and legislative council members form the new association, with Norman Chan, former head of the Hong Kong Monetary Authority (HKMA), tipped as its leader and China Mobile International CEO Li Feng serving as honorary chairperson.
Chan’s extensive traditional finance expertise is expected to help the institute establish robust standards for digital currencies, while also deepening Hong Kong’s talent pool and fostering collaboration among industry players. The institute will focus on monetizing data, tokenizing assets, and driving digital transformation in traditional industries.
This initiative follows Hong Kong’s plans to create a Web3 fund to lure digital currency firms to the city-state. Wu Jiezhuang, co-founder of startup accelerator G-Rocket, believes that the fund, along with acceleration programs, could tip the balance for many fintech firms debating between Hong Kong and Singapore as their operational base.
Over 80 firms have expressed interest in setting up shop in Hong Kong since the government’s announcement to promote growth in the digital currency sector. In response, Hong Kong’s lawmakers are working on a comprehensive legal framework to provide clarity for investors. Chinese banks, eager to offer new firms banking services, have reportedly been attending Hong Kong Web 3 events and meeting with virtual asset service providers to strike deals.
Julia Pang, OSL head of banking relations, notes that this development shows a maturing understanding of the crypto sector by traditional financial institutions. Crypto enthusiasts are hopeful that the Chinese government may eventually reverse its blanket ban on digital currencies, which was imposed in 2021.
New Hong Kong regulations require virtual currency exchanges to obtain a license and relevant permit to operate. The Securities and Futures Commission (SFC) is also soliciting public feedback on digital currency listings, including whether to allow licensed platform operators to serve retail investors and what protective measures should be implemented.
The new licensing regime is set to launch on June 1, with a 12-month transition period for existing crypto exchanges. This more relaxed regulatory environment could attract Chinese-founded Web3 companies, who had often relocated to places like Singapore or Dubai following Beijing’s strict crypto crackdown.
The Hong Kong government has already earmarked $6.4 million (HK$50 million) this year to foster Web3 development, focusing on organizing international seminars and workshops for younger people to cultivate the Web3 ecosystem. This funding will be administered through the government-run business Cyberport, which operates the Web3Hub@Cyberport accelerator. The accelerator aims to attract 1,000 Web3 start-ups to Hong Kong within the next three years.
As Daniel Cham, General Manager for Workday Greater China, said when the budget was released February 22, “Today saw Hong Kong’s first budget presentation since reopening to the world, marking a significant step in the city’s recovery from the pandemic. The 2023-24 Budget is a positive signal of continuing planning and investment for a smart and sustainable city, which will open the way for a rapid digital transformation of the local market.”
Added Cham, “To make this leap and to capitalise on the opportunities presented by the government’s initiatives to “compete for talent”, businesses in Hong Kong needs to be more strategic in attracting and retaining top talent who are capable of leading the way, and it becomes more critical that organisations tap on technologies that can drive insight and enable quick, strategic decisions.”