Web3 Regulatory Trends and Hong Kong's Strategic Position

On May 31, the withdrawal policy of virtual asset trading platforms in Hong Kong officially came into effect, and non-compliant exchanges will cease operations. As the deadline approaches, about half of the VATP applicants have exited the market, sparking widespread discussion. Although some question the future of Hong Kong as a financial center, in reality, Hong Kong's role as an Eastern Web3 hub is just beginning to emerge.

Global Trends in Web3 Regulation

From a global perspective, Web3 regulation is developing in a more refined direction. Japan, as a pioneer, introduced a licensing system for cryptocurrency exchanges as early as 2017. Currently, Japan has 23 approved cryptocurrency exchanges, most of which are domestic companies. Japan's strict regulations have also helped to protect user assets to some extent, resulting in less impact during the FTX incident.

Singapore and the United States began implementing stricter regulations after the turbulence in the cryptocurrency market in 2022. Although the US does not have fully compliant exchanges, the publicly traded company Coinbase gained significant growth due to its relatively compliant image. Meanwhile, other offshore exchanges are facing increasing regulatory pressure.

It is worth noting that although Japan and Singapore were once considered to have overly strict regulations, the Web3 ecosystems in these two regions are becoming more active with the improvement of policies. Recently, the United States has also proposed the FIT21 bill, aiming to provide clearer definitions and regulatory frameworks for digital assets.

Globally, from Southeast Asia to Europe and then to Africa, an increasing number of countries and regions are formulating Web3 regulatory policies. This indicates that compliance has become a global trend, with jurisdictions moving towards precise regulation.

Strategic Positioning of Hong Kong

Compared to the "development first, regulation later" model in the United States, Hong Kong has adopted a "license first, business development later" strategy. Starting from 2022, Web3 regulatory policies were introduced, and the AMLO license will officially be implemented on June 1, 2024, allowing Hong Kong to bypass the phase of unregulated growth. Currently, there are still more than half of the applicants in the market, and licensed exchanges such as HashKey Exchange are performing well, with trading volume exceeding 440 billion HKD.

Hong Kong's regulatory attitude signifies that it has addressed the most complex "exchange" issues in the industry, laying the groundwork for comprehensive regulation. While this process may lead to the exit of some exchanges, it is a necessary and positive stage of development in the long run.

The Web3 Game between the East and the West

With the rise of AI and Web3, the United States and Hong Kong are seen as the eastern and western strongholds of the Web3 industry. The regulatory attitudes in both places will largely influence the global direction of Web3 development. Unlike traditional industries, the decentralized nature of Web3 makes it difficult for a single country to achieve monopolistic regulation.

The recent change in attitude in the United States is significant, and cryptocurrency has become a political issue. Hong Kong, on the other hand, has displayed a more mature and clear regulatory policy. With the arrival of the bull market, Hong Kong is expected to attract more Web3 talent and capital from the mainland and overseas.

The Future Development of Hong Kong

Hong Kong is promoting Web3 development in various fields, including possibly opening up STO and RWA investments to retail investors, as well as establishing a regulatory framework for Hong Kong dollar stablecoins and OTC virtual asset trading. These initiatives will inject new vitality into Hong Kong's financial market.

In this process, licensed exchanges will play a key role. In addition to basic trading operations, they will also provide important support in ETF issuance, RWA, STO, and OTC business.

Overall, Hong Kong's development in the Web3 field is at a critical stage. Despite facing challenges, with reasonable regulation and strategic positioning, Hong Kong is expected to occupy an important place in the future Web3 landscape.