'High-End Dialogue' Professor Lin Chen of the University of Hong Kong: Talent, Regulation, and Product Advantages Will Make the Fire of Hong Kong Web3 Burn Brighter

Article Author: 0x9999in1

Source: MetaEra

Recently, MetaEra's Hong Kong section has been launched, leading the series of activities for the 'Second Anniversary Celebration of Hong Kong's New Cryptocurrency Policy,' of which an important part is 'High-End Dialogue: Influential Leaders of Hong Kong Web 3.0.' The interviewee for this session is Professor Lin Chen, Associate Vice-Chancellor of the University of Hong Kong.

Introduction of the Person

Professor Lin Chen, currently the Associate Vice-Chancellor of the University of Hong Kong, Vice Dean of the Faculty of Business and Economics (Research and Knowledge Exchange), Chair Professor of Finance, and Professor of the Baoguang Foundation Chair in Finance, Director of the Research Center for Financial Innovation and Development, Director of the Doctor of Business Administration (DBA) Program, and Associate Director of the HKU-Standard Chartered Charity Foundation Financial Technology Institute. He also serves as a member of the Hong Kong SAR Government's third-generation Internet (Web 3.0) Development Task Force, a consultant to the Financial Research Institute of the Hong Kong Monetary Authority, and a consultant to the Financial Technology Advisory Committee of the Hong Kong Securities and Futures Commission.

Key Insights

● Web3 is no longer limited to cryptocurrency speculation and chasing price fluctuations; it now has a larger vision and can truly become the third generation of the Internet.

● Only by solving practical problems can its business model achieve large-scale development.

● The development of Web3 has now changed from the previous guerrilla tactics to regular army operations. If we want substantial development, we need to match the entire regulatory framework.

● If RWA can thrive, it can simultaneously drive the development of both on-chain and off-chain, without any one replacing the other; it is a collaborative win-win.

● Compared to the vision it aims to achieve, the current Web3 industry still seems to be in its early stages.

● Utilizing the advantages of the Hong Kong Special Administrative Region to explore first, I believe there is great potential for the development of Web3.

Full Interview

MetaEra: As a teacher and mentor, from your perspective, how do you think talent cultivation and education in the current Web 3.0 field should be conducted to meet the fast-developing needs of the industry? The University of Hong Kong has already launched the 'Web3 Global Elite Course' for society, and we would like to know what achievements have been made, and whether there will be new actions or plans?

Lin Chen: When I talked about blockchain and cryptocurrencies in 2017, industry personnel might have some narrow views or prejudices about it. My feeling is that the transition from Crypto to Web3 actually represents a more ambitious vision and ideal for the industry! It is not merely limited to cryptocurrency speculation and chasing price fluctuations anymore; it now has a larger vision and can truly become the third generation of the Internet, establishing a fairer mechanism to better distribute the economic benefits generated by the system to stakeholders, including users, developers, and contributors. Initially, we hoped that this fair mechanism could self-supervise and self-regulate, and a very good governance mechanism could form a community to achieve such a vision.

The introduction of the term Web3 represents a significant enhancement compared to the previous simple digital currency and cryptocurrency. In the financial circle, we often mention the term financial literacy, which refers to the lack of financial knowledge that can lead to many investment and financial management mistakes. Therefore, in the Web3 world, education and popularization in this regard is very necessary, whether it is writing code or developing smart contracts; the general public's understanding of the Web3 ecosystem is very limited.

Even within the Web3 circle, everyone has different perspectives. Some focus primarily on blockchain technology, while others pay attention to the fluctuations of digital currencies. Therefore, everyone's viewpoint is limited to their specific area and may not have a comprehensive macro understanding of Web3. The 'Web3 Global Elite Course' we launched aims to overlook the entire industry from a higher perspective, and will include aspects such as sector development, regulatory dynamics, technological breakthroughs, and industry empowerment, thus paying less attention to the fluctuations of digital currencies. Because the price fluctuations are also closely related to major global events, such as the introduction of new financial tools or even the U.S. presidential election, we hope to clarify the underlying logic and stories. Based on this consideration, we have launched two sessions of the 'Web3 Global Elite Course.' Due to time constraints, the third session of the 'Web3 Global Elite Course' has not yet started.

Additionally, I want to say that Web3 education will be increasingly accepted by more people. The 'Web3 Global Elite Course' aims to gather everyone interested in Web3. The participants are very professional, including some well-known figures in the industry. We now realize that it is not only about educating Web3 practitioners but also about popularizing education for a broader audience. This is some of my thoughts on Web3 education.

MetaEra: Would you recommend your students to participate in investment trading/entrepreneurship projects in Web 3.0?

Lin Chen: Many of them are already doing these things. The scale of Web3 is still very small compared to the global asset management industry and the entire financial ecosystem. Some large enterprises will also allocate assets; it does not mean they will go all in on Web3, perhaps allocating 5% or even 1% to Web3 can have a tremendous impact on the Web3 ecosystem.

MetaEra: In your current personal work and research, do you still focus more on traditional finance, or do you invest more energy into researching Web 3.0? How do you balance the proportion of these two in your current work focus?

Lin Chen: This is how I view the issue. As a scholar, I will track the direction of financial innovation. Our angle of entry may not necessarily be the hottest application in Web3, whether it has 100 times or 1000 times growth potential, although these are things that everyone is very concerned about. However, from an academic perspective in Web3, what practical pain points can the new methods, business models, products, or technologies in Web3 actually solve in social life? Because only by solving practical problems can its business model achieve large-scale development. Additionally, we will pay attention to financial stability; there have been events in Web3 that affected financial stability, which are essentially similar to issues easily observed in the traditional financial circle. Our research on financial stability does not necessarily differentiate between the two, but rather attempts to study a new phenomenon, why it arises, what practical problems it solves, and whether there are systemic risks. If so, how can we correct them? Overall, our goal is to hope that new tools or products can produce actual benefits and not make the entire financial ecosystem more fragile, but rather possess certain resilience.

The development of Web3 has now changed from the previous guerrilla tactics to regular army operations. If we want substantial development, we need to match the entire regulatory framework.

MetaEra: What core elements do you think traditional finance should focus on first in welcoming the wave of Web 3.0, and what aspects would be better to start with?

Lin Chen: Stablecoins and RWA have a common point, which is the concept of on-chain physical assets. Most mainstream stablecoins still use USD as the underlying asset, and the concept of USD being on-chain in stablecoins is closely aligned with the on-chain of physical assets.

In fact, both of these allow people on-chain to better access off-chain assets. In other words, my funds do not need to go off-chain; I can hold them on-chain, including USD assets, government bonds, real estate, precious metals, etc., all of which belong to the RWA concept. Once funds and assets are on-chain, it is easy to form a closed-loop ecosystem. The entry and exit of funds between on-chain and off-chain is the most costly and difficult part. If on-chain funds can form a system, various types of off-chain assets can be allocated on-chain, solving effectiveness and cost issues, which makes its rise reasonable.

Besides stablecoins and RWA, there are actually a lot of DeFi applications that have existed in Hong Kong previously, including DEX, lending derivatives, and staking applications. From a certain perspective, many applications are very creative, and there are many things in traditional finance that can be referenced, and the design of the incentive mechanisms is also very good.

If regulations are more relaxed, Web3 will have different strategies and different business models, and the ecosystem will become more prosperous. However, this will also generate certain risks, so it is necessary to find a balance between regulation and risk.

MetaEra: The trend of RWA in Hong Kong is flourishing. How do you view the role and potential of RWA in promoting the digital transformation of traditional financial assets? What advantages does RWA have in its development in Hong Kong?

Lin Chen: Since the physical assets are on-chain, they clearly cannot rely solely on the governance mechanism or smart contracts on the chain to complete the tasks, because the assets are off-chain. Therefore, for RWA to develop, it must be a collaboration between off-chain and on-chain. The approval, management, and updating of off-chain assets must be completed by off-chain institutions. If RWA can thrive, it can simultaneously drive the development of both on-chain and off-chain, without any one replacing the other; it is a collaborative win-win.

A benefit of RWA developing in Hong Kong is that there are many good subjects, for example, the Hong Kong Monetary Authority wants to put charging piles on-chain in the sandbox, which can generate relatively stable cash flow in reality. What I want to express is that Hong Kong does not lack good ideas or good assets, but how to implement them, how to promote them to society, and how to develop a regulatory framework that corresponds to them may require more detailed exploration.

MetaEra: How do you evaluate the atmosphere and vitality exhibited by student organizations in the field of Web 3.0 currently? Taking Hong Kong's 0xUClub as an example, we see the active participation and significant influence of the student community in the industry. At the same time, students from the University of Hong Kong and the Hong Kong Polytechnic University have also shown high enthusiasm in related activities and entrepreneurial projects. For these young enthusiasts of Web 3.0, what actions or development paths do you think they should focus on at this stage? What opportunities and challenges will the development of the Web 3.0 industry in Hong Kong bring to Hong Kong students?

Lin Chen: The current Web3 industry, compared to the vision it aims to achieve, still seems to be in its early stages. Especially this year, with the Federal Reserve issuing spot ETFs backed by Bitcoin and Ethereum, it has just been formalized into the regular financial circle, and the road ahead will certainly be much broader.

In terms of challenges, whether it is exchanges, ETFs, stablecoins, or RWA in Hong Kong, they are still not achieving very large scales in tracks that are very closely following international frontiers. If we talk about the impossible triangle in Web3, if Scalability has not improved, it is not a big problem for young students and entrepreneurs; there might still be a lot of development space.

Additionally, if a large number of students want to pursue careers in Web3, job opportunities are relatively limited, and one cannot expect university graduates to immediately form teams and start businesses. Although there have been many instances of Web3 entrepreneurship, it does not necessarily mean it is a universal phenomenon. Of course, we have noticed that more and more Web3 companies want to come to campus for recruitment, and we welcome everyone to the University of Hong Kong to provide students with a choice. I believe this is a two-way selection process; as more and more young people enter this industry, they will definitely bring new ideas, new creativity, and new technologies, which can further promote the development of the industry. In the process of further development, it will also attract more young people to join, thus forming a positive cycle.

MetaEra: A few days ago at the ForthTech event, you shared Hong Kong's strategic positioning in the global Web 3.0 ecosystem. Could you further elaborate on the role Hong Kong plays in the Web 3.0 field and its potential for future development?

Lin Chen: I hope that Hong Kong can have at least a few or one track that can be globally leading among many tracks. Just like we previously mentioned that Hong Kong is an international financial center because it has the highest IPO financing amount each year. If Hong Kong can carve out a new path in Web3 asset management, I believe that the financial development of Hong Kong and the industry development of Web3 can be a win-win situation. Currently, there are hundreds of thousands of people coming to Hong Kong each year through various talent programs, and assets like stablecoins or RWA can be opened to different levels of people, allowing the entire Web3 to play its role under the large framework of asset management in Hong Kong. In this way, Hong Kong's own size can also greatly promote the development of Web3. Therefore, I think Hong Kong has great potential to become a wealth management center for Web3.

Of course, asset management is just one of the tracks. If there are breakthroughs from a technical perspective or business model, I think that would be great. Currently, I feel that various aspects are exploring and trying.

Moreover, the development of Web3 is very fast. Hong Kong is not leading now, but that does not mean it won't lead in the future. Hong Kong's advantage is that it can attract a large number of high-end talents and gather many individuals with funding allocation needs in Hong Kong, so this place does not lack popularity. Coupled with regulatory support, developed products can reach more types of people. Therefore, I believe that in a short time, there is an opportunity to ignite the fire of Web3 in Hong Kong. Utilizing the advantages of the Hong Kong Special Administrative Region to explore first, I believe that there is great potential for the development of Web3.