High-End Dialogue with Hong Kong Legislative Council Member Chiu Tak Kan: Facing the Rise of Web 3.0, the Hong Kong Government has Demonstrated Unprecedented Decision-Making Speed

Author of the article: Echo, MetaEra

Source: MetaEra

Recently, MetaEra's Hong Kong section has been launched with great significance, leading the series of events for the 'Second Anniversary Celebration of Hong Kong's New Crypto Policy,' one important part of which is 'High-End Dialogue: Influential Leaders in Hong Kong Web 3.0.' The interviewee for this issue is Chiu Tak Kan, a member of the Legislative Council of Hong Kong.

Character Introduction

Chiu Tak Kan, Member of the Legislative Council of Hong Kong, President of the Hong Kong Information Technology Federation, and investor in Hong Kong technology enterprises. Mr. Chiu has a deep background and rich experience in both technology and finance, dedicated to promoting the development of Web 3.0 and financial technology, and representing the technology innovation sector in the Legislative Council of the Hong Kong Special Administrative Region, contributing to the development of this field.

Key Insights

The government has been responding to the emerging field of Web 3.0 at a relatively fast pace, which is unprecedented in history. The challenge we face is how to bridge the gap between the speed of government legislation and market expectations.

First, I hope the government will expedite the processing of the remaining licensing applications so that virtual asset trading platforms can obtain legal operating qualifications as soon as possible. Second, explore expanding the range of products that trading platforms can trade. These are all important matters that urgently need to be followed up and promoted.

The government-guided direction is to develop more uses for stablecoins through different scenarios. We look forward to intelligent individuals submitting applications and hope the industry can come up with different ideas.

The legislation for virtual asset custody services is expected to be submitted to the Legislative Council for discussion and approval next year, which is an extremely important step for the development of the entire Web 3.0 in Hong Kong.

Full text of the interview

MetaEra: On the occasion of the second anniversary of Hong Kong's new Web 3.0 policy, what aspects of progress have left a deep impression on you?

Chiu Tak Kan: My impression is that the government has responded to this emerging field at a remarkably fast pace, which is unprecedented in history. However, compared to the expectations of market practitioners, there may still be a certain gap. These practitioners, especially innovators in the technology field, are accustomed to freely exploring and promoting the development of new products and new directions, and are not used to being constrained by excessive rules. This has been the case since the development of blockchain. In terms of legislation, the government's pace over the past two years has been relatively rapid, including advancements in exchanges, stablecoins, virtual asset over-the-counter transactions (VAOTC), and custody services. Looking back at the history of the Hong Kong government, the current legislative process can be seen as very efficient. However, to achieve good interaction between the government and the market, both sides must work towards each other.

Market practitioners may not have fully considered the complexity and experience of government legislation, which is understandable. In the Web 3.0 field, Hong Kong needs to draw more from financial regulatory methods and legal provisions to enhance industry trust. For many industry practitioners, legislation may be a completely new field for them, and they need time to adapt to this objectively slow pace. The challenge we face is how to bridge the gap between the speed of government legislation and market expectations.

I have also been actively promoting communication and understanding between both parties. For example, I tell the government that the Web 3.0 industry needs more inclusiveness and a faster legislative process; at the same time, I also tell industry practitioners that the legislative speed in Hong Kong is already relatively fast. In any mature economy or society, the normal legislative process takes a considerable amount of time. To balance this gap, we are also trying to gradually bring the government and the market closer through pilot projects and regulatory sandboxes.

MetaEra: You mainly focus on the development of the technology sector. As a member of the Legislative Council of the Hong Kong Special Administrative Region, how have you promoted the Hong Kong government to advance towards new Web 3.0 policies, and what unforgettable experiences have you had? Could you share some of these stories with us?

Chiu Tak Kan: Regarding unforgettable experiences, I want to emphasize the understanding of the future market scale of technology and the consensus formation among various government departments in this process. To reach a consensus, first, the market needs the government to recognize, support, and welcome the development of the Web 3.0 industry from an administrative and declarative standpoint. It should acknowledge that the Web 3.0 industry is the direction for future development, has long-term development potential, and enormous market scale. Hong Kong also has the corresponding conditions and capabilities to promote the development of this industry.

The formation of this consensus is not easy, but in the process of promotion, it was found to be relatively smooth. This is thanks to early discussions with the Financial Secretary. About two years ago, when we were discussing this industry, the Secretary quickly recognized the development prospects of the Web 3.0 industry and swiftly expressed support, also promoting the implementation of related policies from the top down. This also accelerated the issuance of the government declaration, which clearly stated the government’s understanding of the market potential of the Web 3.0 industry; this process was actually very short. I was personally impressed by this.

MetaEra: After the implementation of Hong Kong's new policy, what changes have occurred in the regulatory framework for virtual asset trading platforms, and what challenges and opportunities do these changes bring to platform operations?

Chiu Tak Kan: This is mainly reflected in the development of Hong Kong's virtual asset trading platform licensing system over the past two years. Since the implementation of the licensing system, we have witnessed several trading platforms obtaining formal licenses. I also hope the Securities and Futures Commission will expedite the processing of other applications on the current application list, allowing more trading platforms to operate legally in Hong Kong. After more platforms are compliant, the next step is to further enrich the types of products offered by trading platforms. Since June last year, the products that licensed trading platforms in Hong Kong can trade have expanded from Bitcoin and Ethereum to more virtual currencies, and Bitcoin and Ethereum ETF products were also launched at the beginning of this year.

To attract more investors to participate, we need to ensure that the products offered by exchanges are more diversified. Therefore, the next steps include two key points:

First, I hope the government will expedite the processing of the remaining licensing applications so that trading platforms can obtain legal operating qualifications as soon as possible. Second, explore expanding the range of products that trading platforms can trade, not only hoping that exchanges trade virtual currencies but also hoping to see more tokenized products, including the functional tokens (Utility Token) and the tokenization of real-world assets (RWA) that have been discussed. These are all important matters that we urgently need to follow up and promote.

MetaEra: What role do you think Hong Kong plays in international cooperation in the Web 3.0 field?

Chiu Tak Kan: Web 3.0 itself is an international market. The Web 3.0 products launched by the industry in Hong Kong cannot be limited to the local market, as the local market size is limited and cannot support the sustainable development of businesses. We must think about how to push Hong Kong's products onto the international stage to meet global market demand. Therefore, the licensing mechanism for trading platforms mentioned earlier, how to promote more innovative digital asset products to trade in Hong Kong, and how to use Hong Kong to facilitate the buying and selling of these investment products by people from other places are all directions we will follow up on.

MetaEra: What positive impacts does the stablecoin sandbox launched by the Hong Kong Monetary Authority have on innovation in the Web 3.0 field? How do you evaluate the application and potential of the sandbox mechanism in regulatory practice?

Chiu Tak Kan: Stablecoins are very important, and everyone knows that they have developed rapidly in recent years. The issuance of the two major stablecoins has exceeded USD 100 billion, with huge daily trading volumes. People see that there is a very wide space for their use, especially in international education and trade applications. This is particularly suitable for Hong Kong to manage and promote. Hong Kong has a natural advantage in international trade and investment payments, and the use of stablecoins can save time, reduce costs, and increase transparency. Therefore, Hong Kong is fully capable of developing stablecoins as an important product. I feel that stablecoins are still in the early stages, and there is huge room for development, serving as a crucial bridge between fiat currencies and digital assets. The development of stablecoins will help promote the growth of other digital assets in Hong Kong because if stablecoins do not develop well, other digital assets will also struggle to grow; it is a key interface.

In the process of promoting stablecoins, Hong Kong needs to achieve balance in several aspects. First, safety is the most important; there have been some issues with stablecoins in history, such as algorithm problems or the stability of underlying assets. Hong Kong has the capability to provide a safe environment for stablecoins. In addition to safety, usability and innovation are also crucial, and this requires the industry to think about how to issue and use stablecoins in Hong Kong. The government-guided direction is to develop more uses for stablecoins through different scenarios. We look forward to intelligent individuals submitting applications and hope the industry can come up with different ideas to better leverage the potential of stablecoins in future finance through Hong Kong’s licensing mechanism. We believe that innovative thinking from the industry will open new pathways for the development of stablecoins, making them stronger through Hong Kong. This is not only the responsibility of the government but also relies more on the thinking and actions of the industry.

MetaEra: Regarding virtual asset custody service providers, the Hong Kong government plans to introduce a regulatory framework. How do you think this will enhance Hong Kong's competitiveness in providing virtual asset custody services?

Chiu Tak Kan: I am glad to see the development of custody. Initially, the government did not fully consider the custody mechanism when promoting Web 3.0. With the emergence of some issues, such as the FTX incident, society has realized the need to better isolate and protect customer assets. Hong Kong must establish a legal framework for virtual asset custody services. I have also personally participated in this process. Over the past year, I have organized multiple discussions on custody and promoted the custody issue with various government departments. Therefore, I feel very excited to see the Chief Executive propose the idea of legislation for virtual asset custody services in the policy address. This is very significant for me because after more than a year of effort, there is finally progress, and it is expected to be submitted to the Legislative Council for discussion and approval next year, which is an extremely important step for the entire Web 3.0 development in Hong Kong.

MetaEra: The Hong Kong government has provided a series of funding support and incentive measures for Web 3.0 startups. Could you elaborate on these measures and how they assist startups in landing and developing in Hong Kong?

Chiu Tak Kan: When I first saw the potential of startups in the Web 3.0 field, the government entrusted the relevant business to Cyberport and allocated HKD 50 million to promote the landing and development of Web 3.0 startups in Hong Kong. Later, seeing the rapid growth in demand in this area, Cyberport has attracted hundreds of Web 3.0 companies in a short period. Given the huge market demand, I believe this HKD 50 million may not be enough to meet the needs, and I will continue to push the government to provide more support for Web 3.0 startups. Technology startups are the key driving force for innovative development; they bring new ideas, inventions, and innovations. Especially when technology is developing, it relies on these startups to provide vitality. Hong Kong has experts in the financial sector, but also needs talents in the technology field; the combination of the two can give rise to new ideas and new momentum. Therefore, I believe there is greater room for improvement in policy support for Web 3.0 startups. The government mentioned in the policy address that it will provide funding for startup accelerators, with each accelerator eligible for up to HKD 30 million in funding. I hope that at least one or two of these accelerators focus on Web 3.0 technology to better promote the development of Web 3.0 startups in Hong Kong.

MetaEra: The development of Web 3.0 technology poses challenges and opportunities for traditional financial industries. How do you evaluate the progress and strategies taken by traditional financial institutions in Hong Kong to adapt to these changes?

Chiu Tak Kan: In my view, the opportunities in the Web 3.0 field far outweigh the challenges. After this period of development, many traditional financial institutions also see the opportunities here. There is a general consensus: First, this is an opportunity; second, regardless of individual opinions, Hong Kong must move towards the direction of digitization and blockchain technology development. Financial institutions are also actively exploring how to play a role in Web 3.0. Although the current economic situation has caused some steps to slow down or be more cautious in costs, large financial institutions in Hong Kong are undoubtedly studying how to participate and promote the development of Web 3.0. I hope that in the future, there will be more momentum to encourage them to participate more actively. For example, the Project Ensemble initiative launched by the Monetary Authority is a great driving force that can facilitate collaboration between traditional financial institutions and Web 3.0 teams to develop new tokenized financial products together.

MetaEra: What specific advice or guidance do you have for businesses and individuals looking to enter the Web 3.0 field?

Chiu Tak Kan: For individuals, many people are very interested in this industry. For friends who have already participated, I believe they need to have a deeper understanding of technology and solidify their technological foundation, which is essential. Many financial professionals in Hong Kong are involved in the development of Web 3.0, but they often start from a financial perspective. I hope friends in the financial sector can strengthen their understanding of technological foundations so that they can better grasp the development context of Web 3.0. At the same time, professionals in the technology field should also have a deeper understanding of finance, as Web 3.0 is essentially a combination of financial technology, and professionalism is something we must possess. Society should not only pursue quick profit methods but should ensure that both technology and financial foundations are solid, which can create excellent products. Hong Kong provides a lot of support in terms of technological and financial knowledge, including professional talents and courses, and the government also has related subsidies. Everyone should solidify their foundations first, then consider whether to start a business or join a corporate team.

For businesses, it is also very important to understand Hong Kong's advantages and their benefits for company development. I often say that the location of entrepreneurship is very important; its assistance to startups cannot be ignored. Fintech, Web 3.0, and digital assets have good development prospects in Hong Kong, but each company's situation is different and must consider how to utilize Hong Kong's advantages. I also noticed that some teams do not have a deep understanding of Hong Kong's regulatory and licensing systems. I suggest that these teams and talents come to Hong Kong for inspections; I welcome them at any time, and I am willing to share the existing policies and regulations in Hong Kong with them. Everyone must consider how to leverage Hong Kong's advantages to promote their growth.