with US regulators As crypto continues to be scrutinized, startups and founders in the space are looking abroad to find a friendly environment to support their growth.
One such destination is Hong Kong, which is struggling to regain its status. Financial center, is banking on favorable crypto regulations to create a new fleet of entrepreneurs, technologists and investors. So far, his strategy seems to be working.
In mid-April, Hong Kong’s annual Web3 Festival drew more than 50,000 attendees. There were significantly more non-Chinese attendees than last year, when the event felt like a gathering of crypto-refugees fleeing the restrictive policies of mainland China. At this year’s edition, buttoned-up city officials listened intently to founders battling jet lag. While she didn’t make it to the event in person, Kathy Wood, the billionaire founder of ArchInvest, gave a speech via video. And Vitalik Buterin, the nomadic founder of Ethereum, made a last-minute appearance.
This created a sense of déjà vu: In the early days of the industry, Hong Kong was a major hub of crypto firms run by foreign entrepreneurs, including the likes of FTX, Crypto.com and BitMex. Like other jurisdictions around the world, the city banned crypto activities to protect investor interest as market volatility spiraled out of control.
Excitement around Hong Kong’s Web3 scene began to build again last June, when the government legalized crypto trading for retail investors. Since then, the city has implemented a series of measures to regulate crypto-related activities, including a sandbox for stablecoin issuance as well as a Licensing Regime for Crypto Exchange Operators. Following in the footsteps of the US, Hong Kong just listed a batch of cryptocurrency exchange-traded funds. This week.
These measures are in stark contrast to the US government’s tough stance against crypto businesses. Web3 Festival attendees, who came from the United States, Europe, the Middle East, India and other regions, expressed their hope for momentum in Hong Kong. First Digital’s FDUSD, issued under Hong Kong’s digital asset laws and backed by for example US Treasury bills, quickly became the world’s fourth largest stablecoin by market capitalization. Is.
At the same time, people are concerned about Hong Kong’s limitations as an aspiring crypto hub. For one, it’s a relatively small market of seven million people, and the huge market of mainland China is going to be out of bounds, at least for now. Additionally, the rules prioritize investor protection, which results in higher compliance costs and can deter those who favor a more freewheeling environment.
Still, Hong Kong is one of the few jurisdictions, along with countries like the United Arab Emirates, Japan and Singapore, to have made a clear commitment to cryptocurrency. As Jack Jia, head of crypto at global payments company Unlimit, commented: “The fact that Hong Kong is coming up with any crypto regulation, just from a reputation and optics point of view, attracts everyone. will do.”
Open minded officials
Hong Kong doesn’t actually have very lenient crypto regulations. In fact, its scrutiny of exchange operators has led to its crypto poster child, Hashkey. Get a license in Bermuda.. There are some of the world’s largest crypto exchanges, namely Binance, Coinbase and Kraken Conspicuously absent From a list of 22 applicants for the city’s virtual asset exchange license.
As it turns out, Hong Kong’s main focus is trying to provide regulatory clarity for crypto activities.
“The SEC is notorious. ‘Everything is a security, but we’re not going to tell you exactly what license you need to apply for, and then we can deny your application anyway. are,'” Jia said, describing the U.S. Securities and Exchange Commission’s approach to regulation. Crypto Firms “There is no set SEC process. But Hong Kong regulators have initiated a process to listen to your feedback.
In fact, several crypto executives told TechCrunch that they have held closed-door meetings with Hong Kong government representatives. Working to feed real-world data into smart contracts, which are lines of code that execute pre-defined rules, San Francisco-based Chainlink is a major financial infrastructure in Hong Kong, said its co-founder. is in talks to provide its technology to Sergey Nazarov.
“People don’t fully understand that the capital market and crypto are very compatible. Coming to Hong Kong, I realized that compatibility will be accelerated here first because the government and regulators are more open to this compatibility,” Nazarov said. said, who invited Hong Kong Under-Secretary for Finance Joseph Chan to speak at the fireside. Chat with him at Chainlink’s annual conference SmartCon in Barcelona last year.
According to Nazarov, this year, Chainlink is taking SmartCon to Hong Kong at the invitation of the local government, making Hong Kong the first Asian city to host the conference.
The Hong Kong regulator is issuing regulations and regulations on stablecoins. [digital] assets means that Hong Kong can be a place where assets and payments can reliably operate in one system in a regulated way,” Nazarov added. “This is important, because if things are regulated If not done, all the hundreds of trillions of dollars and banks will not migrate.”
Steve Yun, president of the Dubai-based TON Foundation, Telegram’s official blockchain partner, echoed sentiments that Hong Kong may have the most competitive advantage over other aspiring crypto hubs because the city is “a very is trying to come up with a comprehensive framework to make architects and entrepreneurs feel more comfortable and attract talent.
Hong Kong’s financial regulations are complex, but they’re no stranger to Switzerland-based dYdX Foundation CEO Charles de Hussey, who previously led fintech for InvestHK, the Hong Kong government’s foreign direct investment department. Has been the head.
“The Hong Kong government was very open to crypto in the early days,” de Hussey recalled. Then came the period of hostility Regulators attempted to combat massive crypto fraud.. But “about a year ago, I think they understood there was a new market, and there had to be regulations to make sure that opportunity wasn’t lost.”
“That’s when you saw the HKMA [Hong Kong Monetary Authority] More and more CBDCs are doing it. [central bank digital currencies]and the Hong Kong SFC [Securities and Futures Commission] Issuing crypto exchanges and ETFs licenses,” d’Haussy added.
Access to China
When Hong Kong opened up to cryptocurrencies last year, speculation was rife that mainland China might follow suit. That hope is still far off as China continues to bar its people from crypto trading. Nonetheless, companies are now recognizing Hong Kong’s potential as a gateway to another valuable resource from its neighbor.
While Hong Kong is a magnet for financial talent, its neighbor to the south, Shenzhen, is home to some of the world’s biggest tech companies, such as Huawei, DJI and Tencent. Not surprisingly, crypto firms are taking advantage of Hong Kong’s friendly regulations and its proximity to developer resources in Shenzhen and other Chinese cities.
One such player tapping Hong Kong’s geographic location is the TON Foundation. As part of its effort to become a super app, Telegram is partnering with TON, which enables developers to build blockchain-based lite apps that run on Messenger. During Web3 week, the foundation held a bootcamp in Hong Kong in hopes of attracting Chinese developers, especially those familiar with WeChat’s mini-app empire.
“Now we’re reaching out to regions where they have a large number of developers and entrepreneurs, especially people who grew up using some kind of mini-app through a super app,” Yoon said. And the people who contributed to the development of such an ecosystem,” Yoon said. .
For example, a16z-backed Aptos hosted a three-day hackathon in Shenzhen in February, which attracted hundreds of applicants. Aptos, run by a team that previously worked on Meta’s Diem blockchain, has also partnered with Alibaba’s cloud computing arm to attract Chinese developers.
Some foreign founders have gone a step further by establishing a physical presence in the city. zkMe, founded by a German entrepreneur to enable private credential authentication, chose to locate its headquarters in Hong Kong.
“We’re here to build a sustainable business and leverage the technological expertise here, and then obviously the collaboration with the Greater Bay Area,” said Alex Scheer, founder and CEO of zkMe, referring to the move. It’s also really beneficial.” Integration of Hong Kong with nine adjacent Chinese cities through policies such as tax benefits for Hong Kong firms to set up in Shenzhen. Of zkMe’s 16-member team, 14 are based out of its Shenzhen office.
Some founders are more optimistic about Hong Kong paving the way for China’s future adoption of crypto. Anurag Arjun, founder of Dubai-based Avail, a modular blockchain company, believes that governments that see the full benefits of crypto technologies will eventually take a more favorable position.
“[The crypto industry has] The last few years have been making very innovative technology. Some examples are things like zero-knowledge-proof technology,” he said, suggesting that the underlying technology behind cryptocurrency is not to support fraudulent NFTs or speculative trading, but to enhance the underlying technology of the industry. was prepared.
“Because of Hong Kong’s strategic nature, we feel it is an important location – a gateway to China in the future,” Arjun said. “If China opens up in the future — and once we talk to more government officials and make our case for the technology, not just its monetary elements — then what we do in Hong Kong is to expand to China. will be a useful lesson for
Credit : techcrunch.com
