“As exchanges become more and more sophisticated, how can Web3 SMEs participate in the wave of Hong Kong’s Web3 policies? What conditions are needed?”
1. "Introduction to the Hong Kong Government's Web3 Policy"
With the release of the Policy Declaration on the Development of Virtual Assets in Hong Kong (the “Hong Kong Declaration”) on October 31, 2022, the Hong Kong SAR Government clarified its policy stance and approach to the development of the virtual asset industry and ecosystem. After the Hong Kong Declaration, the Hong Kong government’s regulatory framework and support policies for the virtual asset industry have become increasingly clear.
Table: Evolution of Hong Kong’s Web3 Policy
Time Content Policy Announcement In October 2022, the Hong Kong Government issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong", announcing that it would promote Hong Kong to become a global virtual asset center.
Policy implementation In early 2023, the Hong Kong government proposed in its Budget to promote the development of Hong Kong's Web3 industry, and allocated HK$50 million in the February Budget to accelerate the development of the Web3 ecosystem. The Web3.0 Association was established in April. Policy enhancement In June 2023, the Hong Kong government further enhanced Hong Kong's importance in the Web3 field and established a special group.
In addition, Hong Kong’s financial regulator, the Securities and Futures Commission (SFC), has already begun overseeing the rules and regulations of the cryptocurrency market and allows legal operations.
This effectively means that cryptocurrency trading platforms in Hong Kong are now officially recognised as part of the financial services industry, just like other financial platforms such as stock exchanges, fund businesses and lending companies.
This regulation of the cryptocurrency market sends an important signal to the financial and capital markets: funds that were previously unable to enter the cryptocurrency market due to lack of government regulation can now enter the field by taking advantage of Hong Kong's financial concentration; traditional financial institutions that were previously unable to cooperate with cryptocurrency institutions are now eligible to cooperate with them. Currently, Hong Kong subsidiaries with state-owned assets such as Pacific Insurance have begun to explore the cryptocurrency field, and this trend is also gaining momentum worldwide.
Data shows that at least 10 institutions have announced that they will apply for Hong Kong's VASP license, which is also the most comprehensive and important cryptocurrency trading license currently launched in Hong Kong. These include cryptocurrency institutions such as HashKey, OKX, Huobi, Bitget, BitMart, Bybit, BitMEX, OSL and Gate, as well as some traditional financial institutions.
Legality and compliance (minimizing personal and financial risks) + compliant exchanges (providing a way to issue and trade tokens) have laid a solid foundation for Web3 companies, eliminated worries, and are extremely attractive.
2. “How can Web3 companies enter Hong Kong Science Park from 0 to 1?”
As the infrastructure of exchanges is becoming more and more complete, how can Web3 SMEs participate in the wave of Hong Kong's Web3 policy? What conditions are needed? The following will take Hong Kong Science Park as an example to introduce it in detail.
The Hong Kong Science Park is a large-scale, transparent and green technology research and development base initiated and built by the Hong Kong government. Its main goal is to promote innovation and technological development in Hong Kong, cultivate scientific and technological talents, promote exchanges and cooperation between academia and business, and ultimately create benefits for society and the economy.
Hong Kong Science Park provides abundant resources and facilities, providing the best environment for science and technology enterprises to facilitate their research, development and commercialization. Based on the existing information, the connection between Hong Kong Science Park and Web3 and Web3 enterprises can be summarized as follows:
Hong Kong Science Park is a popular destination for attracting Web3.0 entrepreneurs from around the world. In recent months, it has actively embraced Web3.0 and introduced support policies.
There are more than 300 companies in the Science Park, covering fields such as blockchain, AI, digital content and cybersecurity.
Hong Kong Science Park has partnered with G-Rocket to provide financial support and ecological services for Web3.0 entrepreneurs to settle in Hong Kong.
The Hong Kong Science Park can provide approximately HK$1.3 million in funding to start-ups, with a incubation period of three years.
Start-ups can apply for multiple support programs including the Innovation and Technology Incubation Program, Enterprise Acceleration Program and Elite Enterprise Program.
The Science Park provides office and R&D support such as rental subsidies and wage subsidies, and has a good scientific and technological innovation atmosphere and cooperation opportunities.
3. "Hong Kong Science Park Support Policy"
According to the intensity of support, it can be divided into three types of special support, namely: IDEATION Plan, Incubator Plan (Innovation and Technology Cultivation Plan), and Enterprise Acceleration Plan.
IDEATION Plan
Program Overview
The program aims to help companies implement innovative ideas and successfully start their own businesses, with a subsidy of up to HK$100,000 for one year.
Program Requirements
There are clear requirements for the project progress, and it needs to be a project that is close to being launched. However, it is not required to have a completed product and needs to be recommended by local investors. For companies, it is required that the company has been registered in Hong Kong for no more than two years before the start date of accepting applications, or the applicant team must register a limited company in Hong Kong before the start of the program.
Program Application Process
Prepare a business plan that covers the review criteria. The official website has a template.
Complete the online application process and upload supporting documents
Audit criteria:
The quality and capabilities of the team
Commercial feasibility
The innovativeness of the project
Technology research and development content
Program Application Period
September 2023 (Group 24-14)
Application period: 12:00 noon on September 1, 2023 to 12:00 noon on September 29, 2023
Review meeting (for shortlisted applications only): late October to early November 2023
Results announced: end of November 2023
Incubator Program (Innovation and Technology Incubation Program)
Program Introduction
The plan lasts for 3 years, with a maximum subsidy of HK$1.39 million. The difference from the IDEATION plan is that it requires an existing product, at least an MVP version of the product.
Program Requirements
Must be a limited company registered in Hong Kong within 5 years
At least 2 full-time employees, and at least half of the full-time employees are engaged in scientific research
The founding team holds at least 51% of the company’s shares
The company's products are in the prototype stage or are market-proven minimum viable products (MVP).
Program Application Process:
1. Submit your application online
2. Due Diligence Meeting
3. Admission review meeting (10-minute speech and 10-minute Q&A)
4. Admission Notice
Program Application Period
If all the information is complete, the entire process usually takes about 30 days.
Enterprise Acceleration Program
Program Introduction
Help startups to promote business development, quickly enter the global market, and expand international scale. Focus on supporting high-potential startups that are in the accelerated growth period. The plan period is 2 years, and the maximum subsidy can be HK$4.8 million, but the Hong Kong government needs to hold shares, but the shareholding ratio will be lower than that of Cyberport.
Program Requirements
The applicant company is in the growth stage and is committed to expanding globally
Currently an incubatee company under the Hong Kong Science and Technology Parks Incubation Programme or an existing partner company of the Science Parks
The applicant company must have its headquarters and administrative departments in Hong Kong, and the CEO must reside in Hong Kong permanently.
The number of employees does not exceed 100
At least half of the full-time staff in Hong Kong are engaged in scientific research
Program Application Period
Discuss each issue separately
Web3 Talent Subsidy Policy
Hong Kong's Web3 talent subsidy system is mainly for Hong Kong employees hired locally. If a company hires local people in Hong Kong, the company will be eligible for talent compensation provided by the government. For example, the subsidy for a doctoral degree employee with Hong Kong domicile is 32,000 Hong Kong dollars per month; a master's degree employee can receive a monthly compensation of 20,000 Hong Kong dollars; and an undergraduate student can receive a monthly compensation of 18,000 Hong Kong dollars. These compensations will be paid directly to employers to reduce the cost of employment in Hong Kong.
In addition, Hong Kong has two talent introduction programs: the Specialist Introduction Program and the Talent Introduction Program. Excellent talents can choose the Talent Introduction Program. However, for those with less outstanding academic qualifications or experience, they can choose the Specialist Introduction Program, which is guaranteed by Web3 companies.
For the Talent Program, specific companies (such as Web3 in Cyberport) need to provide guarantees to introduce talents through work visas. For example, if you hold a work visa for seven years, you can obtain Hong Kong permanent residency.
It is worth noting that the sponsoring company must meet a certain annual tax threshold, that is, the Web3 project must operate and make profits and pay taxes in compliance before it can apply for the Talent Program. Companies that attempt to evade taxes and shell companies do not meet this requirement. In addition, employees of the Talent Program can change jobs freely within seven years, while employees of the Talent Program cannot change the company they sponsor during this period.
In addition, the Science Park also provides companies with a pool of doctoral-level R&D talents, who can also enjoy the above-mentioned monthly subsidy of HK$32,000. However, talents receiving the subsidy must work in Hong Kong.
4. "Costs and requirements for entering the Science Park"
The Science Park rents out offices based on area. The official website discloses that the office rent is approximately HK$23-25 per square foot, where 1 square meter is approximately equal to 9 square feet.
The Science Park requires that more than half of the R&D positions of the companies settled in the park be located in the Science Park, and the project application review will focus on technical and R&D positions. When determining whether it is an R&D position, employees will be required to submit their resumes and have them reviewed by a dedicated person.
When applying for a science park, you will be required to provide relevant proof that your company is a technology-based company.
When applying for a science park, you will be required to provide a complete technology research and development plan, incubation plan, and operation plan.
In addition to submitting materials, applying to the science park also requires interviews with companies and projects.
5 Conclusion
In general, the Hong Kong government's comprehensive regulatory policy on the Web3 industry means that the Web3 industry has a clear positioning in Hong Kong. It is not only legal and compliant but can also apply for preferential and subsidy policies similar to other high-tech enterprises.
The licensing system implemented for exchanges provides legal protection for the subsequent development of Web3 companies (such as issuing tokens). In addition, in addition to providing cash subsidies to start-ups for hiring Hong Kong employees, companies are also provided with policies (Talent Scheme) for mainland employees to obtain Hong Kong permanent residency status, and employees cannot change companies within 7 years, which will increase the attractiveness and loyalty of companies to outstanding employees to a certain extent.
As one of the traditional world financial centers, can Hong Kong combine with the Web3 wave to give birth to a group of excellent Web3 companies? Let's wait and see.
✏️Disclaimer: This article is for reference only, DYOR
Source: Alpha Investment Research, Sun Peihan
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