jakiro
Author: Yue Xiaoyu; Source: X, @yuexiaoyu111
Hong Kong’s blockchain industry used to be in full swing, but it seems to have died down recently.
How is the Hong Kong currency circle now?
Recently, I have been living in Hong Kong, communicating frequently with many friends and projects in Hong Kong, and gradually gaining a clear understanding of the regulatory environment and policy trends of Web3 in Hong Kong.
Here are summarized in 10 items.
1.Let me start with the conclusion: Regarding the development of the Web3 industry in Hong Kong, I am pessimistic in the short and medium term, but optimistic in the long term..
2.Pessimism in the short and medium term is due to repeated swings in regulatory policies and the battle between the left and right brains..
Not only the central government and the Hong Kong government are fighting each other, but the administrative departments and regulatory departments of the Hong Kong government are also fighting each other.
The central government wants financial stability, the Hong Kong government wants to develop new industries, the administrative departments want to be innovative, and the regulatory agencies want to be conservative.
The most fundamental contradiction is that the decentralization and global liquidity of the blockchain are naturally mutually exclusive with the government’s strong foreign exchange controls and restrictions on capital outflows.
3.Long-term optimism is because the general trend is irreversible and stablecoins are really valuable, especially for cross-border trade and cross-border payments, which is a huge change.
At the same time, the United States is accelerating the legislation of the cryptocurrency industry and has taken over the legislative power and leadership. Sooner or later, other countries and regions will be forced to “open the door.”
It’s just that it’s not the time to make a decision yet, so you can still waver and wait and see, but the further you delay, the more passive you will be.
Of course, it is undeniable that Hong Kong has at least taken a crucial step and opened an opening, which can then be gradually expanded.
More importantly, Hong Kong is still China’s external window or financial backdoor. Now it is just closed or controlled more tightly, but this window must be there.
4.The first phase of Hong Kong dollar stablecoin licenses will only be given to local consortiums, with a maximum of 5 licenses..
JD.com and Ant have withdrawn from applying for stablecoin licenses. The core reason is that the mainland government is worried that these technology companies are too large and the risks are difficult to control.
Of course, for technology giants such as JD.com and Ant, Hong Kong does not issue licenses, so they can apply in other regions.
As a city with a population of 7 million, Hong Kong’s market size is not that large, but the stablecoin business of technology giants must still be done.
5.It is basically difficult to implement Hong Kong dollar stable currency. It is not only the license issue, but also the biggest obstacle is the limitation of business scope under risk management and control..
For example, one of the biggest limitations of Hong Kong’s current stablecoin policy is that end users must require KYC.
This means that there is no secondary market for Hong Kong dollar stablecoins and can only circulate within the whitelist address range.
This is actually to further limit the risk scope, but it also sacrifices the usability of the stable currency, eventually becoming the Hong Kong version of the “digital renminbi”.
6. Although Hong Kong dollar stablecoins are out of the question, RWA has a lot to offer!
Hong Kong’s regulatory logic is: layered supervision based on underlying assets.
The bottom layer of stablecoins is legal currency, so regulatory requirements are the highest;
Secondly, RWAs with underlying financial assets may be recognized as securities;
Finally, RWA is based on physical objects and has the lowest regulatory requirements.
7.At present, there are many RWA projects with real assets as the underlying layer, but there are very few RWA projects with financial assets as the underlying layer..
However, RWA with financial assets as the underlying layer is far better than RWA with physical objects as the underlying layer, because physical assets need to be financialized before being tokenized, which requires a long path, high costs, and low returns.
The current RWA opacity of physical assets is too high, and the physical assets part is basically a black box. Most projects are either based on fraudulent concepts or suspected of money laundering.
8.I used to think that high-quality assets in the traditional financial world were scarce and had to be snapped up..
However, after talking to the entrepreneurial team working on RWA, I discovered that high-quality assets in the traditional financial world still lack financing sources. It can be said that high-quality assets are greater than the amount of funds.
The value of tokenization is that it lowers the barriers to accessing capital.
9.The evolution of RWA still follows this path: legal currency on the chain —> bonds on the chain —> stocks on the chain —> financial derivatives on the chain —> physical assets on the chain.
The regulatory requirements for putting legal currency on the chain are too high, and small businesses cannot participate;
Physical assets that are put on the chain are not high-quality assets, and even if they are put on the chain, they are not high-quality assets;
The standard financial products in the middle part are put on the chain, and the space is huge, which really solves the problem of lack of funds on the asset side and lack of assets on the capital side.
10.Don’t speculate on the regulatory attitude, you will only lose miserably.
Looking at this problem from the other side: supervision is not clear and implemented, but it is actually a protection and barrier for existing currency circle practitioners.
If we wait until regulation is implemented and big companies rush in, what opportunities will we have?
So now is a good window period.
Opportunities are reserved for those who are prepared, those who waver are quitting, and those who are determined are seizing the time to build. The road to success is never crowded.
Make technical preparations and product preparations, and when the regulatory starting gun sounds, you can sprint directly.
The premise is that industry practitioners must believe in this industry and the projects they do really solve the needs and problems of the market.
