Article reprint source: PA Recommended Reading
2024 is destined to be extraordinary. After three years of dormancy, Web3 has finally ushered in the beginning of a new bull market cycle. New cycle, new narrative, what fresh blood is beating under the pulse? Let's focus on the Asian financial center, which is also the "heart" of Asian Web3 - Hong Kong. In the past year, supervision, innovation and capital have made rapid progress here, and the entire industry has found a delicate balance between innovation and regulation.
New narratives are intertwined and hot topics emerge in an endless stream. This article will review the top ten hot words in the Hong Kong Web3 field in 2024 to get a glimpse into the rise and development of the industry in a year.
Native compliance - "Don't do unconventional things, just find the right way"
In 2024, the whole world is working on Web3 compliance, and the era of “regulatory arbitrage” is gone forever.
Different from the "open first and then repair" approach of the United States and other regions, Hong Kong has taken a new route of "rules first, innovation follows". From VASP, CBDC, Hong Kong dollar stablecoin, to virtual asset spot ETF, Ensemble sandbox plan, each legislation and each pilot is a phased result of the active exploration of Hong Kong regulators in collaboration with local financial institutions.
More importantly, Hong Kong's supervision, which has long been known for its cautiousness, will completely "shift gears and accelerate" in 2024. Whether it is the Hong Kong Regulatory Commission issuing four VASP licenses in one go in December, or the world's first ETH spot ETF, this "stable but fast" pace is enough to show that Hong Kong supervision has achieved a good balance between prudence and openness. .
If Web3 is a game, then Hong Kong in 2024 will not only have an upgrade route in place, but will also compile a “beginner’s guide” to welcome new players.
BTC asset allocation——"Countries and companies compete to 'hoard coins'"
What virtual assets should I invest in in 2024? BTC, which has increased by 150% throughout the year, must be one of the answers. In the second half of 2024, the United States took the lead in launching a coin hoarding competition. Trump's BTC strategic reserve plan directly upgraded Bitcoin to a "national strategic material", which led to Brazil, Poland, Japan and other countries to follow suit.
The policy has been set, and the capital market has quickly followed suit. In 2024, institutional investors purchased a total of 859,454 BTC, among which MicroStrategy, which has long invested in BTC, took the lead, increasing its holdings by nearly 250,000 BTC this year, earning $20 billion and firmly sitting on the throne of the BTC whale.
The world is welcoming a "coin hoarding wave", and corporate institutions are not far behind. Hong Kong-listed Boyaa Interactive (HK.0403) directly announced that it holds 2,641 Bitcoins and 15,445 Ethereums, and quickly exchanged 14,200 ETH for 515 BTC, a set of operations that flow smoothly; Nano Labs (Nasdaq: NA) even joined hands with HashKey Exchange to spend $50 million to deploy BTC assets. As of the time of writing, Nano Labs already holds BTC worth $5.5 million. The corporate hoarding of coins is done in one go, which can be called a textbook operation. In addition, it is understood that companies such as Guofu Innovation and Coolpad Group have also quietly followed up and occupied the Bitcoin reserve battlefield in advance.
Virtual Asset Spot ETF——“Old Tools, New Ways to Play”
ETFs have long been commonplace in traditional financial markets, but when they are combined with virtual assets, they have become a breakthrough for the Web3 market in 2024. In January 2024, the United States approved the first BTC spot ETF, which triggered a market frenzy. While other countries were either waiting or starting to consider, Hong Kong responded quickly, not only launching the BTC spot ETF, but also taking the lead in launching the ETH spot ETF to occupy a position in the Asian market.
At present, there are 3 BTC spot ETFs and 3 ETH spot ETFs in the Hong Kong market, launched by three top institutions, Huaxia, Harvest, and Bosera. According to Coinglass data, as of the time of writing, the total net asset value of Hong Kong's BTC spot ETF reached US$439 million, and the net asset value of ETH spot ETF was US$63.56 million. Although there is still a gap in scale with the United States, Hong Kong's virtual asset spot ETF has quickly begun to occupy the market with its innovation and vitality, preparing the way for subsequent capital inflows. As a result, in July, Hong Kong welcomed Asia's first Bitcoin inverse product-CSOP Bitcoin Futures Daily (-1x) inverse product; in November, the Hong Kong Stock Exchange launched a series of virtual asset indexes, including reference indices and exchange rates for BTC and ETH, bringing more financial instruments to the virtual asset market.
The virtual asset spot ETF not only opens the door to Hong Kong's traditional financial market, but also marks the starting point for the surge in Hong Kong's Web3 capital.
Stablecoins - "The top currency for cross-border payments and the most popular currency for regulators"
Mainstream stablecoins such as USDT and USDC have long been the "top players" in the cross-border payment field, relying on their "hard power" of being pegged 1:1 to the US dollar. Whether it is crypto trading, wage settlement, or commodity payment, stablecoins are everywhere. However, "fame brings troubles", and the risk of multiple depegging has also made them the focus of global supervision.
In June 2024, the EU (Stablecoin Act) came into effect, instantly opening the door to global regulation. Hong Kong took the lead and started the year with full firepower: it released a regulatory consultation on fiat stablecoins in February, launched the "Stablecoin Sandbox" plan in March, released a consultation summary in July, and directly submitted the (Stablecoin Act) in December... The Legislative Council's KPIs are clearly arranged.
What’s even more interesting is that the first list of sandbox players includes well-known companies such as JD CoinChain Technology, Yuanbi Innovation Technology, Standard Chartered Bank (Hong Kong), Animoca Brands, and Hong Kong Telecom (HKT), instantly turning the stablecoin sandbox into a “top club”.
At present, Hong Kong's regulatory focus is temporarily on the Hong Kong dollar stablecoin, but this wave of operations has also stabilized the market and taken Hong Kong's digital asset regulations to a higher level. As for the USDT, USDC and other US dollar stablecoins that are popular around the world, will Hong Kong consider releasing them? The story is yet to be continued.
VASP license - "Only with a license can you dare to open a business"
To play in the virtual asset trading market, a VASP (Virtual Asset Service Provider) license is the "entry certificate". With the United States and Singapore in the past, and Dubai and the European Union in the future, it has become a mainstream trend to hold a license. As the financial center of Asia, Hong Kong's VASP license is also ready.
Currently, there are 7 platforms that have been licensed to operate in Hong Kong, namely HashKey Exchange, OSL Exchange, HKVAX, HKbitEX, Accumulus, DFXLabs and EX.IO. These "good students" not only strictly abide by the compliance requirements of the Anti-Money Laundering Ordinance (AMLO), but also pass the multi-level review of the Hong Kong Securities and Futures Commission (SFC).
Hard work always pays off, and licensed companies are more favored by the market. For example, HashKey Exchange's overall platform capital exceeded HK$10 billion in 2024, with a cumulative trading volume of HK$580 billion, ranking among the top 10 centralized exchanges in the world. Although there are still more platforms waiting for review, the Hong Kong Securities and Futures Commission has formulated a clear licensing procedure roadmap. In 2025, I believe that more platforms will enter the market with licenses.
PayFi——“Is it old wine in a new bottle, or a new round of payment revolution?”
In 2024, PayFi (payment finance) has become the new favorite of Web3. It seems to be just moving payment to the blockchain, but in fact, PayFi has improved the efficiency of cross-border payments, allowing the traditional "slow remittance" to be instantly upgraded to "seconds to the account".
If there is a recognized and enduring mainstream narrative in the Web3 industry, it must be the key proposition of Mass Adoption. PayFi is an important practitioner of this narrative. In a broad sense, PayFi belongs to the RWA track, but its ambitions go far beyond that. Behind it is the leverage power of blockchain on huge amounts of real-world assets - in the payment field alone, the total size of the credit card, trade financing, cross-border payment and other market segments exceeds 40 trillion US dollars, and PayFi is currently only deploying in the "long tail market" of traditional finance, with huge potential.
The core value of PayFi lies in connecting blockchain funding pools with off-chain financial needs. This connection is not easy and requires the integration of multiple forces: first, it must operate in a relatively relaxed regulatory environment and crypto-friendly cities; second, there are not many institutions with financial strength and the ability to provide full-chain compliance support from infrastructure to KYC, deposits and withdrawals, liquidity management, etc. Only a few regulatory licensed institutions have this capability, such as HashKey Exchange, the largest licensed virtual asset exchange in Hong Kong.
Hong Kong may become a "financial hotspot" for PayFi. As one of the global financial centers, Hong Kong has huge cross-border capital demand, mature financial infrastructure, and policy protection such as the "Ensemble" plan and stablecoin supervision. The red carpet for the industry to land in Hong Kong continues to be laid.
Traditional institutions rush into the market - "old money becomes new money"
Although virtual asset spot ETFs have found a way for traditional capital to enter the Web3 market, how can indirect investment be as attractive as making money directly? Seeing the crypto bull market at the beginning of the year, traditional financial giants in the United States made a lot of money by issuing BTC spot ETFs. On the other hand, Hong Kong brokerages, with tens of millions of users, are still guarding a stock market that is like winter - more than 10,000 Hong Kong stocks have a daily trading volume of less than HK$10,000.
With an open mind, it is better to bring users to participate in Web3. As a result, traditional brokerages in Hong Kong finally "rushed into the market". Traditional brokerages such as Victory Securities and Aide Securities, Internet brokerages such as Futu and Tiger, and even foreign giants such as Interactive Brokers, have all obtained the No. 1 license upgrade from the Hong Kong Securities Regulatory Commission and quickly laid out virtual asset businesses. In order to "take fewer detours", they chose to join hands with the local licensed exchange HashKey Exchange, integrated HashKey Pro, an institutional-level comprehensive service, and quickly opened the deposit, withdrawal and trading functions of virtual assets such as BTC and ETH. In just a few months, it has driven a trading volume of 5 billion Hong Kong dollars.
The participation of brokerage firms not only brings traffic, but also brings their professional advantages into Web3 - risk control, compliance, and old customer relationships, which pull traditional stockholders into the world of virtual assets in minutes. What is most worth looking forward to is that if the Web3 market breaks through further in 2025, Hong Kong brokerage firms will even bring in global "old money" with their inherent advantages to fully link traditional finance and virtual asset markets.
OTC regulation: The multi-billion dollar market may be put under a "tightening spell"
"To deposit and withdraw funds, go to Hong Kong", hundreds of offline conversion shops have attracted more people. Especially for those institutions and high-net-worth users with millions of transactions, OTC transactions are not only flexible, but also provide higher privacy and liquidity. Therefore, the Hong Kong OTC market has been vibrant. According to statistics, there are about 200 offline OTC trading shops and 250 active online service providers in Hong Kong, with an annual transaction volume of nearly 10 billion US dollars.
There are undercurrents behind the prosperity. In recent years, multiple OTC robberies and the false propaganda of OTC promoters in the JPEX incident have made people see clearly the compliance shortcomings and potential risks of money laundering in the OTC market. In response, the Hong Kong government quickly "made up for it" and released (Recommendations for the Regulation of OTC Transactions of Virtual Assets) in February, planning to put a "tight ring" on the OTC market. According to the latest news, the supervision plan will be consulted and legislated in 2025/2026, and the Customs and the Securities and Futures Commission are working closely on the project.
Opinions in the industry are polarized - some worry that short-term regulation will cool down the market, while others are optimistic about the long-term trust dividend brought by regulation. After all, without a "license", the market is just "free range"; with regulation, Hong Kong's OTC market can grow from a "wild kingdom" to a compliance center trusted by global capital and welcome greater growth.
Running Club - "National Fitness Project"
Running meetings has always been a "national sport" for Web3, and Hong Kong is the sports base this year. In 2024, there will be no less than 50 medium and large-scale events in Hong Kong alone, ranging from discussions on virtual asset supervision to the implementation of blockchain technology, from code surfing by technology geeks to strategic dialogues with business leaders, Web3 topics are all-encompassing.
Large summits such as WOW Summit, FORESIGHT 2024, Hong Kong Web3 Carnival, Fintech Week, technical forums such as Solana Hacker House HK and HashKey Hackerhouse Taichu, not to mention the numerous small salons and cocktail parties... The most typical one is the Hong Kong Web3 Carnival. The event venue is nearly 9,000 square meters and the event lasts for four days. In addition to the main venue, nearly 200 surrounding activities were held near the event. It is vaguely estimated that the cumulative number of offline participants exceeded 50,000, attracting more than 300 world-renowned speakers and more than 100 popular projects to participate. There will also be Consensus, which will be held in Hong Kong for the first time in February next year, and Web3 Carnival in early April.
The industry will continue to develop and the meetings will continue, and the trend will continue to be hot in 2025.
Shop in front and factory in back - "Shenzhen-Hong Kong combination, new situation of Web3"
In 2024, the Chinese Web3 center has moved from Shanghai, Hangzhou and other places to Hong Kong. The "front shop and back factory" model is a unique skill of Hong Kong and Shenzhen. This combination of punches not only plays the industry advantage, but also creates a unique style of play unique to the Greater Bay Area.
"Front store" is Hong Kong's strength. As one of the world's leading international financial centers, Hong Kong has an efficient capital market, an open business environment, and constantly improving virtual asset regulatory policies. From the ever-changing international industry activities, to localized and clear policy guidance, to strong policy support such as the HK$10 billion Innovation and Technology Guidance Fund, the Special Visa Program, and a high-quality financing environment. For Web3 companies, landing in Hong Kong means standing at the center of the global market.
The killer feature of Shenzhen, the "back factory", is its strong R&D capabilities, perfect industrial chain, and extreme cost control, which provide an ideal environment for the incubation of Web3 projects. Therefore, many Hong Kong Web3 companies prefer to deploy their technical teams in Shenzhen, and quickly trial and error blockchain underlying technology development, hardware equipment production, and some operational links. In 2024, Hong Kong Cyberport also strengthened cooperation with multiple technology parks in Shenzhen to make the flow of resources between Shenzhen and Hong Kong smoother.
This "front shop and back factory" model has formed a "brand + technology" closed loop, which is helping Web3 companies to unleash their huge potential and enter the global market. Hong Kong in 2025 is worth looking forward to.
