jakiro
Jessy, bitchain vision
Since the release of the “Policy Declaration on the Development of Virtual Assets in Hong Kong” in November 2022, compliant Web3 that meets the requirements of the Hong Kong government has developed for one and a half years.
In the past year and a half, compliant exchanges were open to retail investors, spot ETFs of Bitcoin and Ethereum were approved to go online, and some crypto-native projects chose to set up branches in Hong Kong.On July 18, the Hong Kong government officially announced the list of institutions entering the Hong Kong dollar stablecoin regulatory sandbox, which can already try to issue Hong Kong dollar stablecoins first.
A more subtle change is that it integrates the daily lives of residents. When retail investors enter the securities companies on the street, they can participate in the compliant investment of Bitcoin and Ethereum. More top activities about Web3 are blooming everywhere, and blocks are related to theThe knowledge of the chain is written into primary school textbooks…
The development of Hong Kong’s Web3 industry is steadily promoting according to the plan, and Hong Kong citizens are also slowly accepting Web3 in a subtle way.However, from the perspective of practitioners,Overall, the development of Web3 in Hong Kong has also gone from being relatively drastic to being more cautious now.
As the Hong Kong government’s policy on Web3 is becoming increasingly tightened and foreign capital withdrawal is the top priority for these Web3 companies that are developing in compliance with Hong Kong.market.
Can the Hong Kong dollar stablecoin improve the Hong Kong dollar’s position in the international financial market?
The Hong Kong dollar stablecoin is the highlight of the Hong Kong government’s bet on the development of Web3 this year. In March this year,The Hong Kong government issued a notice to approve institutions that want to issue Hong Kong dollar stablecoins can start applying to enter the sandbox.Four months later, on July 18, Hong Kong announced the first list of sandboxes: JD.com Coin Chain Technology (Hong Kong) Co., Ltd.; Yuanbi Innovation Technology Co., Ltd.; Standard Chartered Bank (Hong Kong) Co., Ltd., AnfengGroup Co., Ltd., Hong Kong Telecommunications (HKT) Limited.
When consulting the public on the regulatory system of Hong Kong’s stablecoin issuers, 108 institutions submitted their opinions.Chen Weimin, vice president of the HKMA, issued a statement saying that the HKMA has received inquiries from ten institutions, and some institutions with sufficient preparations formally submitted applications and finally approved three.He said whether it is approved to enter the “sandbox” depends on many factors, such as the issuer’s business plan after the implementation of the law, whether there is a need to test the stablecoin issuance process at this stage and within a limited range, etc.
Yuanbi Technology, which was selected for entry into the sandbox this time, submitted an application within the first time after the notice was issued.Entering the sandbox means that under supervision, it is possible to launch Hong Kong dollar stablecoins first and launch specific use cases.
Stablecoins are definitely a global business, and the market has basically been divided by US dollar stablecoins, and USDT is even the only one.How much cake can Hong Kong dollar stablecoins share in the current environment where stablecoins that anchor the US dollar occupy an absolute market share?It is also difficult for issuers of Hong Kong dollar stablecoins to give a positive answer.
Rita Liu, CEO of Yuanbi Technology, said in an interview with Bitlink Vision that the current stablecoin market is a process of making the cake bigger, rather than competing for the market in a red ocean.After the Hong Kong dollar stablecoin is launched, they will spend more energy to cooperate with global compliant exchanges, institutional market makers, etc., or cooperate with traditional corporate merchants to do payment settlement in cross-border trade.Give Hong Kong dollar stablecoins more use cases.
It can also be seen that although the Hong Kong dollar stablecoin is anchored to the Hong Kong dollar, its actual influence does not entirely depend on the Hong Kong dollar’s position in the international financial market, but on how each Hong Kong dollar stablecoin itself opens the market in the crypto world..The Hong Kong dollar stablecoin is widely used in Web3, which can actually improve the Hong Kong dollar’s position in the international financial market.
Chen Weimin also said that he would implement the stablecoin issuer supervision system in Hong Kong, make every effort to promote the drafting of laws, and strive to submit the relevant draft regulations to the Legislative Council for review before the end of the year.
Sandbox – legislation – issuance, and the Hong Kong dollar stablecoin is being implemented step by step.The more core role of the Hong Kong dollar stablecoin is to be a link that seamlessly grafts traditional finance into the blockchain world.Just by simply moving the exchange of foreign exchange between fiat currencies in various countries to the blockchain, there is a huge market. From this point of view, the imagination of fiat stablecoins is large enough.
Globalization has become the focus of development of Hong Kong Compliance Exchange
It is difficult to make money when working in a compliant exchange in Hong Kong.
One week this year, the institutional client business of a Hong Kong exchange was only more than US$100.This profit includes the revenue of all services provided to institutional customers, including handling fees, custody fees, etc.
Market insiders close to the exchange told Bitlink Vision reporter that most institutional customers are reluctant to use compliant exchanges, and they are more accustomed to over-the-counter trading.One major reason is that the money of institutional clients is not clean.
There are only more than 7 million local residents in Hong Kong, and for a licensed exchange in Hong Kong, the ceiling for converting users is very low.Taking Hashkey Exchange as an example, in the past year after retail trading was launched, Hashkey Exchange Hong Kong website has accumulated nearly 100,000 users.The Hashkey Exchange International Station, which was launched in April this year, has accumulated nearly 100,000 users in one month.
It is reported that Hashkey Global is a compliance license obtained in Bermuda.Currently, it mainly targets the Asia-Pacific and Southeast Asia region.Japan, South Korea and Taiwan are both key markets for Hashkey Global.The focus of Hashkey Group’s exchange business has shifted to Hashkey Global.
Based in Hong Kong and expanding the world again may be the only way for Hong Kong’s compliant exchanges.Building a compliant exchange in Hong Kong is both difficult to get a card and make a profit.
At the beginning of 2023, news came out that the Hong Kong licensed exchange OSL sought a acquisition for HK$1 billion. At that time, it would cost about tens of millions of Hong Kong dollars to apply for the next license.
Hong Kong is very strict about applying for crypto-native exchanges, and most native exchanges in the currency circle are difficult to obtain approval.At the end of May, as the second issuance date approaches, traditional crypto-native exchanges, such as OKX, Huobi and other exchanges, announced their withdrawal from the Hong Kong market before the second license was announced.It is said that if you want to get a license in Hong Kong, you need to sign a letter of commitment to ensure the removal of mainland users.
To summarize the second batch of 11 institutions that were used as licensed by the Hong Kong government in June, we can find that these institutions are local institutions and companies with mainland Chinese resources, with traditional financial background.
Regardless of the reason why traditional currency exchanges exit the Hong Kong market, the result is that Hong Kong does not welcome traditional currency institutions.Hong Kong’s Web3 market is more like a traditional financial game.What Hong Kong hopes is to use Web3 to complete the transformation of traditional finance, or to use Web3 to empower traditional industries.
However, it is not easy for both traditional financial transformation Web3 or native Web3 to gain a foothold in Hong Kong.
Let’s look at OSL. BC Technology, which is backed by it, has been in a loss state for several consecutive years.The actual controlling shareholder of BC Technology is Gao Zhenshun, the “shell king” of Hong Kong stocks.Unlike Hashkey, the trading business for retail investors is not the core of OSL’s business. They focus more on their institutional business. For example, on September 12, 2023, OSL also announced with Jiashen International Asset Management Co., Ltd.It has reached strategic cooperation in securities tokens (STOs), and has reached liquidity cooperation with many exchanges. It has become a custodian of Jiashishi International and Huaxia Fund in spot ETFs of virtual currencies.
Like Hashkey Exchange, this year OSL has also focused on the expansion of the global market. At the beginning of this year, the company announced the launch of its 2024 globalization strategy.Moreover, since last year, OSL has begun to actively deploy overseas licenses, such as submitting a license application to Singapore.
It’s not just exchanges, but virtual banks are not easy to make money.In 23, ZA Bank’s net loss was HK$399 million, but its net loss narrowed by 20% compared with the previous year.Not only ZA Bank is losing money, but eight virtual banks in Hong Kong, including Ant and Tianxing, are all in the losses.
Exchanges and virtual banks will face similar difficulties when they develop their businesses in Hong Kong. For institutions, it is roughly how to market and promote new things to seize the market.The local market in Hong Kong is very limited. How to make good use of Hong Kong’s position as an international financial center to bridge domestic and foreign investment is also an important consideration for these institutions.
The more reason for these difficulties is actually the withdrawal of foreign capital in Hong Kong.When money becomes less, half the result will be achieved with twice the price.For Hong Kong institutions, what they need to do together at the moment is to look for opportunities outside more.
The two earliest licensed exchanges in Hong Kong will focus on global markets this year.For the exchange, Hong Kong can only be a basis for compliance.A broader world, overseas.
The spot ETF fee rate of virtual currency is high and the redemption process is complicated, so it is persuading users to withdraw
Another important move by the Hong Kong government this year is the launch of virtual currency spot ETFs.Hong Kong’s Bitcoin and Ethereum spot ETFs have been online for two months. According to SoSo Value data, as of July 5, the total transaction volume of the six spot ETFs exceeded US$26 million.
During the new subscription stage, Hong Kong ETF has achieved great results.According to SoSo Value data, the scale of three Bitcoin ETFs was US$248 million when they were issued and subscribed on the first day, while the US Bitcoin spot ETF products, excluding grayscale (GBTC) converted from trusts to ETFs, had a total net value of only 130 million on the first day.Dollar.
A market insider close to several major ETF issuers in Hong Kong told Bitlink Vision that the huge difference between the size of the subscription stage and the actual transaction volume was that when the initial subscription was actually these ETF issuers found big customers.They were allowed to purchase ETFs in the form of resource replacement, so the amount of subscription on the first day was large.
The trading volume after that is the real ETF volume in Hong Kong.Hong Kong’s independent capital is already small, with a population of more than 7 million, and the current size of Hong Kong stocks is only HK$3.2 billion.The reason why fund companies all buy US ETFs is very simple. Virtual currency spot ETFs are a global competitive market, and capital will choose the lowest cost, highest efficiency and the safest product.
However, Hong Kong’s virtual currency spot ETFs are actually not competitive.The compliance cost in Hong Kong is high. The above-mentioned market insider told reporters that time is very fast, and everyone is rushing to put it on the shelves. For example, in the custody bank, Huaxia and Jiasheng have both chosen to sign agreements with OSL. If there are two issuers that issue virtual currency spot ETFs.It is the choice of OSL as the hosting provider, and the hosting fee is very high.
This undoubtedly raises the cost of spot ETFs.Comparing the bitcoin spot ETFs in Hong Kong and the United States, it was found that in the United States, except for the ETFs issued by Grayscale and Hashdex, the other fees are between 0.2% and 0.49%.The rate for Huaxia is 1.99%, the rate for Jiashishi is 1%, and the rate for Boshi is 0.85%, which are both higher than that of the United States.
In terms of user experience, Hong Kong’s virtual currency spot ETFs are not doing well at present. Take Victory Securities as an example. This is the only securities company that can achieve the entry and exit of coins. Users also need to apply and redeem by email and phone.
All of the above issues require further optimization by publishers.
An obvious and more fundamental problem is that the issuer of Hong Kong’s virtual currency spot ETFs is still a traditional financial thinking model to make virtual currency spot ETFs, competing for marketing and channels, rather than working hard to improve product quality.
Some practices on Huaxia Fund can prove this.Compared with the virtual currency spot ETF products of the three funds, Huaxia Fund has the largest trading volume, and its ability to achieve the largest trading volume has a lot to do with channels and marketing.For example, at the Bitcoin Asia Conference held in early May this year, at this meeting focused on exploring the development of BTC ecosystem, the marketers of Huaxia Fund also stood on the main stage of the venue to introduce the situation of Huaxia Fund spot ETFs and at the conferenceA booth was set up on the site.This is enough to see the efforts put into China Fund in marketing and market.
For Hong Kong’s virtual currency spot ETFs, what should be done next is how to reduce handling fees and simplify the application and redemption process, so as to gain a place in the global competition.
Whether it is a virtual currency exchange, a virtual currency spot ETF, or a Hong Kong dollar stablecoin.What we face is not just the Hong Kong market, but how to expand to the world and participate in global Web3 competition after Hong Kong obtains compliance.
