Produced｜Okey Cloud Chain Research Institute
Author｜ Jason Jiang
Since the release of the policy declaration on the development of virtual assets in Hong Kong at the end of 2022, Hong Kong has always been the focus of the Web3 world. When Hong Kong government officials frequently showed up to encourage Web3 innovation and development, when tens of thousands of Web3 Builders gathered in Hong Kong again after three years, when traditional institutions and original Web3 companies communicated equally in the same context, we not only saw the Hong Kong government The sincerity in developing Web3 has also seen that Web3 has really become popular in Hong Kong.
Hong Kong in April belongs to Web3, but will the promised land of Web3 really be Hong Kong? This is a thinking question for every Web3 Bulider after the excitement.
What can Hong Kong bring to Web3?
Describing the Second Industrial Revolution in 1960, John F. Kennedy described automation as "a revolution with the dark threat of industrial dislocation, increasing unemployment, and deepening poverty. But it is more a revolution of hope." , to bring new prosperity to the laborers and new prosperity to the country". Web3 is also an innovative change that requires long-term optimism and hope.
But reality is not kind to Web3. Since the second half of 2022, U.S. regulators have been taking a continuous high-pressure posture against many encryption institutions including Coinbase, Binance, and Tron. The successive closures of many encryption-friendly banks have further compressed the development space of Web3; The attitude of Singapore, a holy land, has also taken a turn for the worse recently. During this process, Web3 practitioners are more aware of the importance of regulatory compliance, but they also urgently need to find the next piece of land suitable for Web3 innovation. Looking at it now, Hong Kong has seized the opportunity.
For Web3, in addition to its own endogenous evolution mechanism, external factors such as policies, talents, traffic, and funds are all necessary for development. Among them, funds and traffic have the most direct role in promoting Web3 at this stage.
Image source: Okey Cloud Chain Research Institute
The first is flow. The reason Web3 needs attention is because more and more people are paying attention to it. Only by continuously attracting external attention can positive feedback of innovation be formed. Whether it is favorable policies or high-frequency activities, Web3 has gained unprecedented attention in Hong Kong and even Greater China in the past period of time. At the same time, Hong Kong is also attracting and accepting global Web3 Builders and their innovations with sufficient inclusiveness and openness, and has created a platform for them to promote ideas and communicate freely. This is very important for the immature Web3. The contention of a hundred schools of thought during the Spring and Autumn and Warring States periods laid the cultural foundation of China's feudal society for more than two thousand years. We believe that Web3 also needs to go through a similar stage to find its real development foundation.
During the Hong Kong Carnival, we seem to be seeing the embryonic form of "Web3 contention": Builders with different backgrounds and different tracks tirelessly export their understanding of Web3 to the outside world over and over again, as well as the "great cause" they are devoting themselves to. The Web3 they described may not be comprehensive, and may even be falsified one day in the future, but on those occasions and at those moments, we must still applaud them sincerely. God is not necessarily respectable, but every ordinary person on the road to becoming a god is respectable.
Second is funding. We always hope that killer applications will be born in the Web3 and blockchain fields, but after experiencing the black swan in 2022 and the tightening of global regulation in 2023, many people realize that the liquidity problem is the bigger problem facing Web3 at this stage . Web3 innovation is shifting from pure flow thinking to a stage where flow thinking is parallel to fluid thinking, or even more important. The core of liquidity is capital.
Regardless of the grand narrative, the high-frequency Web3 activity may not bring a large number of Web2 users directly into Web3, but it will definitely make more Web2 funds focus on and support Web3. On various occasions in Hong Kong last week, we frequently saw the presence of Web2 capital and institutions. They are showing great interest in Web3 and will inject more liquidity into this space. At the same time, favorable policies have also made more Hong Kong financial institutions release friendly signals towards Web3. They are actively docking virtual asset custody and deposit and withdrawal businesses. If Hong Kong’s financial institutions can open up the fiat currency deposit channel, it will undoubtedly attract Web3-friendly funds from both sides of the Hong Kong River and even the world.
In addition, Hong Kong's unique geographical advantages will also make it a gathering place for Web3 innovations in the East and the West: international Web3 projects will use Hong Kong as a window to experience and try to reach the Chinese market in a compliant manner. Hong Kong is a better springboard to try internationalization.
All of the above, coupled with the supportive policies of the Hong Kong government and abundant human resources, Hong Kong now possesses various elements for Web3 development.
However, whether Hong Kong can become a suitable place for Web3 still largely depends on what Hong Kong wants to gain from the development of Web3. Hong Kong supports Web3 because it sees the huge potential of Web3, but if Web3 seriously deviates from development expectations, or fails to create the value expected by the Hong Kong government, or even creates uncontrollable risks, no one can guarantee that the policy orientation will not change. For Web3 practitioners, it is necessary to understand Hong Kong's core demands for the development of Web3 as early as possible. Only in this way can Hong Kong take root and make Hong Kong a real Web3 hot spot.
And if the digital nomads in the Web3 world only regard Hong Kong as a temporary dormant transit island rather than a habitat for long-term reproduction, then please enjoy the current carnival in Hong Kong.
What is Hong Kong's core demand for developing Web3?
As a highly open and outward-looking economy, Hong Kong has undergone three industrial transformations since the 1950s. During this process, traditional manufacturing was basically moved out of Hong Kong, and the service industry has gradually become a pillar industry in Hong Kong. Today, the service industry accounts for 90% of Hong Kong's economy, but it is still concentrated in the traditional fields of finance and trade, shipping and logistics, tourism and exhibitions. This asset-light model has shaped Hong Kong's past glory. However, under the development trend of the new global economy, the traditional and monolithic industrial structure has long been unable to meet Hong Kong's development needs, and has become a "resource curse" for Hong Kong in the words of some experts.
Optimizing the industrial structure and accelerating industrial upgrading has become a difficult problem for Hong Kong. Hong Kong has tried to redevelop the manufacturing industry, but with little success. The fundamental reason is that the physical costs of land and manpower in Hong Kong are too high, while high-end manufacturing with higher technological content is a blank sheet of paper in Hong Kong. Developing financial technology innovation industries such as Web3 and embracing a broader digital space has become Hong Kong's choice.
On the other hand, during the wave of global Internet entrepreneurship in the past two decades, Hong Kong has carried the liquidity needs of a large number of technology companies, but their business centers are often not in Hong Kong, and Hong Kong has not enjoyed the benefits brought by Internet technology innovation. Times bonus. To some extent, Hong Kong has actually missed the first wave of opportunities for Internet technology innovation, and also lost an important time period for economic upgrading and industrial transformation. This has led to the loss of Hong Kong's local labor force in recent years, the tendency of Hong Kong's capital to flow out, and its status as an international center has also been impacted: the ranking of the Global Financial Center Index (GFCI) shows that Singapore has surpassed Hong Kong to rise to the third place in the world.
Today, after experiencing social pain and the impact of the epidemic, Hong Kong not only wants to continue its advantages in the financial service industry, but also wants to recover its lost time in the field of Internet technology innovation. While consolidating its status as a global financial center, Hong Kong will become a Become an international innovation and technology center.
According to Chen Maobo, the Financial Secretary of Hong Kong, "science and technology innovation" is not a multiple-choice question for Hong Kong today, but a must-answer question. After missing the golden period of Internet technology development, Hong Kong must catch up and develop technological innovation in the Web3 industry. In an interview with the media, Liang Hanjing, head of financial technology at Invest Hong Kong, also said that although Hong Kong is now an international financial center, no one can guarantee what it will be like in 10 years. Hong Kong's economy cannot rely solely on a single sector, and urgently needs to find new growth points. Web3 represents a paradigm shift that will change the way information, value, and trust are interacted with on the Internet or in the Metaverse, and may even enable more decentralized, efficient, and inclusive platforms and services that empower users and creators. Power will also create new opportunities for innovation, entrepreneurship and social impact. From the expressions of these Hong Kong government officials, it is not difficult to see Hong Kong's expectations for Web3 innovation.
Source: China Academy of Information and Communications Technology "Web3.0 Foresight Research Report"
As the next-generation Internet, Web3 is not only a technological revolution that brings together many cutting-edge digital innovations, but also a financial revolution with virtual assets as the core object. Although there have been many risks in the virtual asset market before, the Hong Kong government has not ignored the inherent value of virtual assets and the benefits brought by the blockchain technology behind them. Hong Kong has regarded virtual assets as an important part of the Web3 ecosystem. Hong Kong's recently released "ETF and the Development of the Virtual Asset Ecosystem in the Global Financial Market" even pointed out that virtual assets are becoming an important asset type in the world and will have an increasingly important impact on the future development of the financial system.
The development of Web3 and virtual assets in Hong Kong is not only a retreat, but also pragmatic: the Hong Kong government is more concerned about technological innovation and application innovation that can have a substantial impact on the economy and society. Chen Maobo pointed out at the Financial Technology Forum that the success of the application of financial technology, virtual assets or Web3 in the financial field depends on whether the new technology, model and application can truly meet the needs of the real economy, create value for citizens, and even benefit the whole society. Proceeds. Indeed, all policy support and infrastructure construction ultimately need to be implemented in practical applications—only application innovation can help Web3 break through the circle and reach ordinary users, and only the prosperity of the application layer can reflect the long-term value of Web3. In the next 15 years, Web3 applications built on blockchain infrastructure will become a new focus of development and have a revolutionary impact on human economic and financial activities, social interaction, and privacy protection in the digital world.
In the field of virtual assets, Hong Kong will not repeat the development trajectory of the currency circle, and its key development will still be the CeFi track, in which regulated virtual asset transactions and custody services, as well as digital Hong Kong dollars and stable coins will be the next stage Focus on the direction of focus and development. DeFi, which is more decentralized and more difficult to supervise, may not be within the scope of Hong Kong's goals in the short term.
Source: Public Internet
Conclusion
The narrow terrain and lack of resources limit Hong Kong's imagination in physical space, but it has forced it to cultivate a very resilient civilian spirit and businessman culture. This characteristic perfectly fits the contract spirit of modern society and provides Hong Kong's financial industry with good soil. In the subsequent transformations, as a place where Eastern and Western cultures blend, Hong Kong has always acted as a lubricant between mainland China and the world with its soft body and flexible mechanism. In the past 20 years, it has become the freest economy in the world, and The most internationally renowned and influential Chinese city.
Now facing a new wave of technology and financial reform that may be triggered by Web3, Hong Kong has taken the lead. However, whether Hong Kong will become the promised land of Web3 will depend on the actual fit between the development of Web3 and Hong Kong's needs. However, the two-way choice between Hong Kong and Web3 is still in a sweet period, and it will take time to answer whether it is really suitable.
