I believe Hong Kong has the potential to become a global Web 3 center, with rich financial resources and a strong interest from the younger generation of family offices in digital assets. Hong Kong's unique financial background provides advantages for supporting blockchain projects. The rapid development in this area is remarkable, and maintaining its growth advantage will be key.

Author: Sunova

Source: MetaEra

Recently, the MetaEra Hong Kong section was launched, with a series of events celebrating the second anniversary of Hong Kong's new crypto policies, one of the key parts being 'High-end Dialogue: Influential Figures in Hong Kong Web 3.0'. The interviewee this time is Yat Siu, co-founder and executive chairman of Animoca Brands. The content of this article is translated and edited based on the English interview.

Character Introduction

Yat Siu, co-founder and executive chairman of Animoca Brands, is a leading figure in the blockchain and gaming industry. He serves as a member of the Hong Kong government's Web 3.0 Development Advisory Committee and is actively involved in promoting the application of digital property rights and decentralized technologies. Yat has extensive experience in technology and entrepreneurship, having co-founded several successful startups before establishing Animoca Brands. He is regarded as a thought leader in integrating non-fungible tokens (NFTs) into mainstream gaming and advocates for the transformative potential of blockchain technology in creating a fairer digital economy.

Key Insights

● Blockchain grants true ownership of digital assets, and Hong Kong can play a significant role in this field through its market economy framework.

● The success of the shared network will benefit the entire Web 3 ecosystem, and Hong Kong can drive ecosystem prosperity through reinvestment in innovation.

● NFTs are not only a market but also a symbol of identity and culture, serving as future tools for protecting creators' rights.

● Stablecoins act as a bridge connecting Web 2 and Web 3, transforming traditional assets into Web 3 assets, facilitating mass adoption.

● Hong Kong has tremendous potential to nurture a new generation of innovative projects in the Web 3 space.

● Hong Kong's Web 3 investment ecosystem is rapidly growing, though not at the scale of the US and Middle East, it has significant development potential.

● Animoca Brands operates in accordance with local regulations, but since we do not handle client assets, our compliance burden is much lighter than that of exchanges.

● Hong Kong is expected to become the global Web 3 center, but further forward-looking actions are needed to maintain competitiveness.

● Hong Kong has immense potential to achieve rapid growth in the Web 3 space by attracting talent.

● The open metaverse is steadily developing, with the Telegram and TON ecosystem and high-quality Web 3 games becoming significant game-changers.

● Web 3 enhances users' financial literacy, deepening their understanding of the value of capital, assets, and digital property rights.

Full interview

MetaEra: Animoca Brands is at the forefront of protecting digital property rights. Can you provide us with a detailed explanation of the implementation process of this technology and the tangible benefits it brings to content creators and rights holders? As a Hong Kong-rooted company, what improvements or advancements do you think Hong Kong could make to further enhance support for digital property rights?

Yat Siu: We leverage blockchain to create digital property rights because blockchain (like the technology used by Bitcoin) enables true digital ownership. For example, if Bitcoin is in your wallet, you truly own it; it cannot be taken away. Blockchain technology achieves this by recording ownership on a secure ledger. This technology can extend from value-storing assets (like Bitcoin) to NFTs (non-fungible tokens), which are unique digital identifiers used to identify digital assets like artwork or gaming items. NFTs represent the true provenance of digital items, similar to physical goods.

In the digital world, proving ownership outside a specific ecosystem is nearly impossible. For example, if you want to sell an item from a game to someone outside the ecosystem, there is no reliable way to record or transfer ownership. In real life, you can verify a transaction to sell a car with legal documents, but digital items lack such assurances. Blockchain changes this by enabling verifiable digital ownership, making these assets convertible into capital.

Once an item is viewed as a capital asset, it can appreciate in value, and you have certainty over its ownership, making it a viable choice for investment. Certainty of ownership is crucial—without ownership, there is no incentive to invest. For example, in Web 2, platforms like Instagram allow you to build a reputation, but you do not truly own it; the value belongs to the platform. This is similar to landlords and restaurant owners—after years of running a restaurant, it is the location rather than the business itself that holds most of the value. However, Web 3 enables you to own your digital assets.

Digital property rights open new business opportunities, allowing individuals to build services on the assets they own, similar to how ownership in the real world enables new layers of services like car rentals or customization. Another aspect of ownership is its cultural value, reflecting identity. Many items we purchase reflect who we are, such as fashion or cars. Owning a specific brand or item (like a Tesla or Lamborghini) conveys certain traits without needing explanation. In the digital realm, gaming items and skins carry similar meanings, but currently, we do not truly own them; we are merely renting them. We see a trillion-dollar market built on digital ownership with tremendous potential.

As for Hong Kong, it is ideally positioned in this digital ownership revolution due to its market economy framework. Capital relies on property rights, and Hong Kong is one of the most capital-friendly cities in the world that understands the value of property rights and capital. Hong Kong is also a financial center, similar to New York, Dubai, or Singapore, which are leading in the development of Web 3 and blockchain. Hong Kong's financial expertise and support for industry innovation make it a natural leader in this field.

Facing recent challenges, such as competition from Singapore, Hong Kong has the opportunity to define its role as a future financial center by embracing Web 3 and blockchain.

MetaEra: It's refreshing to hear about Animoca Brands' leadership in protecting digital rights! This technology and innovation truly have the power to change the game. Since we're discussing technological applications, let's delve into the Web 3 economy. What do you think is the most challenging aspect of constructing a robust Web 3 economic model?

Yat Siu: Animoca Brands contributes to the ecosystem through building, investing, and collaborating in the Web 3 space. Although we are not a traditional fund, we are one of the largest investors in Web 3, with over 540 investment cases. This makes us one of the largest investors in the overall Web 3 space. Through investments, we support and nurture entrepreneurs and builders, enhancing the resilience of the Web 3 ecosystem.

The spirit of Web 3 and blockchain centers on decentralization, which we interpret as broadly distributed shared ownership. A well-distributed and decentralized ecosystem fosters fairer competition and a more just market, balancing the competitive environment. In contrast, monopolies often dominate the market by leveraging their control. Decentralization combats this by redistributing power, creating a fairer and freer market.

We support this vision of a 'shared network,' meaning that by helping Web 3 projects grow, the entire ecosystem will benefit. For example, if Bitcoin reaches $100,000, the entire Web 3 space will benefit, not just Bitcoin holders, leading to increased network value, trading, and liquidity flows. Unlike Web 2, where companies like Facebook or Google primarily benefit themselves from their success, the success of Web 3 is shared more broadly, with value permeating throughout the ecosystem.

Investing in Web 3 is crucial for this growth. Imagine if every company in Hong Kong invested 5%-10% of their profits into local startups; the startup ecosystem would thrive, similar to Silicon Valley. In Silicon Valley, even though the infrastructure is sometimes less than in Hong Kong, innovation still flourishes due to the high concentration of angel investors. Here, it's not just large funds—individual engineers and employees often invest in multiple projects. This culture of allowing anyone to become an investor is what drives innovation.

In contrast, in Hong Kong and much of the world, this investment culture is less common. People may prefer to invest in real estate or stocks rather than startups. However, in Web 3, most companies and individuals that gain profits typically reinvest in other projects, creating a boosting effect that helps the ecosystem grow.

Regarding building in Web 3, there is no magic bullet, but a core concept is that tokens provide access to network effects. Tokens are network assets, like Bitcoin, that have financial and application utility, creating dynamics that are distinctly different from traditional assets. For instance, holding Facebook stock does not affect your use of Instagram, and the number of followers on Instagram does not impact your equity in Facebook—they are completely independent. But in Web 3, they are unified: holding tokens makes you a stakeholder in the network.

Owning tokens means you have a stake in the network, not just serving as a store of value. This network asset is a unique type of asset, similar to owning shares of the network effects themselves. The value of network economies, like token economies, grows through its users and utility, just like traditional economies. Building in Web 3 is essentially building a network economy, and understanding how to optimize this is fundamentally different from establishing typical business models. Many newcomers to Web 3 may not realize they are creating a network economy, which is more akin to forming a nation than merely running a business.

MetaEra: Establishing an excellent user experience and community is a vital part! Additionally, NFTs play a central role in this process. Can you tell us about the role of NFTs in the Animoca Brands ecosystem? What are your thoughts on the new uses of NFTs in the future?

Yat Siu: NFTs as a technology can be seen as a foundational shift, much like how MP3 changed music. NFTs represent 'non-fungible tokens,' and this description might not be the most attractive way to explain digital ownership. In the future, I don't believe we will still refer to them as NFTs; we might simply call it 'digital ownership.' This is why we use the term 'digital property rights.' We believe this concept will become important eventually. However, for now, we need to explain this technology, which is why terms like NFTs are still widely used, even though many people do not fully understand them.

In general, we view NFTs as a storage of digital culture. They represent value beyond money; they are not currency or a store of value, but rather a storage of culture. Within this cultural storage, there are different types of capital. Financial capital is evident, but there are other forms, such as symbolic capital (e.g., university degrees), cultural capital (art and literacy), and social capital (networks and friendships). For us, NFTs capture cultural, social, and symbolic capital. While meme coins may represent part of these elements, NFTs carry more weight in terms of symbolism and culture. NFTs can be likened to Birkin bags, Picasso artworks, Lamborghinis, Rolexes, or even Nike shoes, all of which symbolize social identity and personal taste.

Since NFTs are unique, they have various applications in digital ownership, such as art or gaming items. They can also be used for intellectual property (IP) to protect music, dance, or educational rights in the form of NFTs. This allows creators to embed legal protection at a cost of less than a dollar, which is revolutionary. I see a future where NFTs serve as tools to protect, enhance, and develop intellectual property. I envision not just a few rare NFTs but billions of NFTs representing assets from property deeds to creative works that can then be traded, bought, and shared.

Currently, NFTs represent a $10 billion industry. Although it has declined from its peak in 2021, this is still significant growth compared to nearly zero five or six years ago. NFTs have indeed changed the game in terms of digital rights and transactions, especially with branded items like NFT Nike shoes, granting unique symbolic value.

MetaEra: Animoca Brands recently secured substantial financing. What is the company's future capital operation strategy? What business or regions will be prioritized for expansion?

Yat Siu: Animoca Brands is indeed very active in financing, particularly in regions like Saudi Arabia and the Middle East, which, along with the Asia-Pacific region, are growth markets. These regions hold an open and friendly stance towards Web 3, making them ideal places for our expansion. In addition to gaming and Web 3, we are also focusing on two main areas: digital identity and education.

We are building reputation in Web 3. Reputation is crucial for establishing trust as it allows people to conduct business safely without disclosing personal information. After all, blockchains do not show who the other party is; we can only see wallet addresses. However, to build a stronger network, understanding each other's reputation is essential. Imagine doing business repeatedly in Hong Kong with strangers but being unable to establish any rapport. This is unsustainable. Through Mocaverse, we are creating a digital identity system that allows for reputation scoring, so even if you meet someone for the first time, you can trust the new business contact. This will enhance trust, which is a key factor in our industry.

The second key area is education, particularly addressing the student loan crisis. In the US, this issue has reached $2.2 trillion. We aim to leverage Web 3 to provide better student financing solutions that could help lower costs and increase returns. These initiatives in digital identity and education will support broader growth in gaming, decentralized finance (DeFi), and the entire Web 3 ecosystem.

MetaEra: Animoca Brands is actively involved in Hong Kong's stablecoin initiatives. What are your views on the role of stablecoins in the blockchain ecosystem? What plans or insights does Animoca Brands have regarding the integration of stablecoins into its broader digital economy strategy?

Yat Siu: Our focus on stablecoins arises from the current lack of a stablecoin framework in Hong Kong. We are working with Standard Chartered Bank and HKT to create a local stablecoin to support the local ecosystem and enhance confidence. We believe stablecoins serve as a bridge between Web 2 and Web 3, making it easier for users to convert assets into Web 3 assets, as demonstrated by stablecoins like Tether and Circle. This initiative aligns with Animoca Brands' direction towards becoming an institutional-level Web 3 participant, a role that still lacks development in the industry.

The importance of stablecoins lies in their ability to guide users from Web 2 to Web 3 on a large scale. Stablecoins allow users to retain assets in familiar currency forms within Web 3 and provide a straightforward way to transfer value. If someone creates value in Web 3, converting it to stablecoins is faster and safer than going through an exchange, offering flexibility for further transactions or storage.

Our strategy regarding stablecoins also aligns with the philosophy of mass adoption, simplifying asset management through blockchain technology to make it more convenient.

MetaEra: Recently, there have been reports that Animoca Brands is considering a listing in Hong Kong. In light of the overall weakness in the Hong Kong capital market, how do you view the impact of the new policies on the company's listing decisions? What specific advantages do these policies bring to companies looking to expand in the market?

Yat Siu: As for the potential initial public offering (IPO), being a Hong Kong-based company, there are obvious advantages here. Despite a weak capital market, Hong Kong remains one of the largest markets globally. Given that our headquarters are located here, choosing Hong Kong is a reasonable decision. Although an IPO takes time, once we are ready, Hong Kong is likely to be an important market for us. Hong Kong is developing more comprehensive crypto policies and clearer regulations, providing a good opportunity for our future listing.

MetaEra: Animoca Brands has invested in over 500 projects. What specific areas will you focus on next? Do you think Hong Kong has the potential to nurture a wave of new innovative projects? What are your thoughts on the current mood in the Web 3 venture capital space, especially regarding the hesitance to invest in projects led by Chinese founders?

Yat Siu: We are seeing rapid growth in Web 3 development, with many Chinese founders leading the way. The Web 3 model emphasizes property rights and asset frameworks, which aligns closely with Chinese business thinking, especially among the population in Hong Kong and Greater China.

While many founders choose to operate outside of mainland China, they have a deep understanding of this model and establish companies in places like Hong Kong and Singapore. Additionally, many well-known overseas Web 3 companies are run by ethnic Chinese or Chinese individuals. This contrasts sharply with Web 2, where there were relatively few Chinese founders with significant international influence. However, in Web 3, the global influence of Chinese founders is quite pronounced. The largest exchanges globally, like Binance, OKX, HTX, and Bitget, are primarily founded by Chinese individuals, with Coinbase being the only exception. This reflects a significant trend: Web 3 is attracting a large number of Chinese entrepreneurs, which is very noteworthy. The capitalist principles of Web 3 seem to align well with many people's intuitive understanding of this.

Hong Kong's investment community in the Web 3 space is larger and more distributed than in Web 2, which means that Web 3 startups here are receiving significantly more funding. This funding advantage allows Web 3 companies in Hong Kong to grow at a faster pace and scale than Web 2 companies. Additionally, many successful Web 3 entrepreneurs tend to reinvest their earnings into new projects, creating a natural reinvestment cycle within the community.

While Hong Kong's Web 3 investment environment has not yet reached the scale of the US or the Middle East, it has considerable potential. Hong Kong is rich in wealth, and the younger generation of family offices shows a keen interest in digital assets, Web 3, and blockchain. As a global financial center, Hong Kong has a deep understanding of financial systems, aligning well with the principles of Web 3 and blockchain.

While Hong Kong has traditionally focused more on public markets than private equity, blockchain and tokenization provide a rapidly developing alternative to the public market. This familiarity with liquid markets gives Hong Kong a unique advantage in supporting blockchain projects.

MetaEra: Animoca Brands' extensive investment strategy is indeed impressive! With the growing global interest in blockchain, we are also seeing increasing regulatory attention. How does Animoca Brands handle compliance issues across different regions? How does Hong Kong's approach differ from other markets? Additionally, how do you collaborate with other companies or government agencies to promote the development of Web 3 and the metaverse?

Yat Siu: Regarding regulation, the global framework is still evolving. Although a clear model has not yet formed, Hong Kong is progressing alongside places like Dubai, Singapore, Tokyo, and Liechtenstein. Most regulatory work focuses on fungible tokens, emphasizing liquid assets, while NFTs are generally viewed as consumer assets rather than financial instruments and are thus largely unregulated.

In certain markets, we need to assess whether we will operate locally, which certainly requires compliance with local regulations. We have dedicated compliance and legal teams to manage this. However, generally speaking, areas like Web 3, gaming, NFTs, education, and digital identity are not subject to strict regulatory requirements. Regulators have clearly stated that these sectors fall outside the current regulatory framework, meaning we face a much lighter regulatory burden than exchanges.

Unlike exchanges, we do not handle client assets or manage asset segregation. Our investments are made using our own balance sheet, and any asset management is supported by our funds. This is significantly different from exchanges, as they must comply with strict third-party asset custody and management regulations. Therefore, while we comply with local laws in the business domain, our regulatory obligations are not as extensive as those of exchanges.

MetaEra: Animoca Brands' commitment to compliance truly reflects its focus on sustainable and long-term growth! What are your thoughts on Hong Kong's evolving role in the global cryptocurrency space? While Hong Kong's shine may have diminished in the Web 2.0 era, do you think it has the potential to reclaim its status as the 'Pearl of the East' with the rise of Web 3.0? Could Hong Kong's new crypto policies become a benchmark for global regulation?

Yat Siu: Hong Kong's goal is to become the global Web 3 center, although there is still much work to be done. To achieve this, Hong Kong needs to take more forward-looking approaches than other regions. The city has a rich talent pool in this field, making it easier for people here to understand the value of token economics—something that may be more challenging for outsiders. I believe Hong Kong has immense potential.

Web 3 is still in its early stages, and it is impressive to see the companies that have already launched or are being built here. Many companies have significantly scaled up, which is particularly striking—especially considering that Hong Kong was not a major tech hub before Web 3. Now, Hong Kong does possess genuine momentum. However, Hong Kong needs to maintain its growth advantage to stay competitive. Although it is not yet the largest platform—Dubai and to some extent Singapore still lead—the pace of progress in Hong Kong is very rapid. Attracting more talent will be key to its continued growth.

MetaEra: As an industry leader, how do you view the development of blockchain and metaverse technologies on the global stage? What emerging technologies do you think have the potential to change the game in the near future?

Yat Siu: The metaverse is still developing, especially in the Web 3 space. Many people are skeptical about Facebook's metaverse not performing as expected, leading them to believe that the metaverse itself is failing. However, the 'open metaverse' is actually thriving, with a market valuation of around $18 billion, primarily driven by gaming. I believe transformative areas will include platforms like Telegram and the TON ecosystem, which are facilitating rapid growth of Web 3 products. They provide users with a new integrated experience unbound by the constraints of traditional gaming distribution channels like Apple, Google, Facebook, and Steam for Web 3 blockchain and NFTs.

Another key area is the games themselves, particularly high-quality games that can bridge Web 2 and Web 3. Right now, we see Web 2 players enjoying games without even knowing they are based on Web 3. For example, 'Off the Grid' from Gunzilla in our portfolio may compete in popularity with PUBG and Fortnite. Players love this game because it is fun, not necessarily because it is blockchain-based. This approach can seamlessly bring Web 2 users into Web 3 through experiences they already love, like gaming.

Regarding the development of global technology, I believe the next phase will be to continue developing blockchains that can integrate user-friendly, immersive experiences. As a leader in this field, Animoca Brands is closely monitoring and innovating in emerging technologies that may redefine the metaverse and gaming.

MetaEra: As a Web 3.0 entrepreneur, what would you like to say to newcomers transitioning from Web 2.0 to Web 3.0?

Yat Siu: Overall, I want to convey that transitioning to Web 3 and becoming a Web 3 user will enhance your financial literacy. In other words, you will gain a deeper understanding of money, assets, and digital property rights while becoming more proficient in managing financial matters. I believe the real revolution of Web 3 lies in financial guidance and literacy: the transition from Web 2 to Web 3 teaches you new skills, such as understanding the value of assets, property, and money and how they operate. This makes you a better investor and a manager of your own portfolio—skills that are often not taught in school, even though money is an essential tool in life. Web 3 offers democratized access to financial knowledge and skills. In short, the transition from Web 2 to Web 3 enables you to enhance your financial literacy and capabilities.