Article author: Sunova

Source: MetaEra

Recently, the MetaEra Hong Kong section was launched with great fanfare, part of the series of events for the 'Second Anniversary of Hong Kong's New Crypto Policy', an important part of which is 'High-End Dialogue: Influential Figures in Hong Kong Web3.0'. The person interviewed in this issue is Yat Siu, co-founder and executive chairman of Animoca Brands. The content of this article is based on an 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 Web3.0 Development Advisory Committee and is actively involved in promoting the application of digital ownership and decentralized technologies. Yat has extensive technical and entrepreneurial experience, having co-founded several successful startups before founding 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

● The blockchain grants true ownership of digital assets, and Hong Kong can play a significant role in this area with its market economy framework.

● The success of the shared network will benefit the entire Web3 ecosystem, and Hong Kong can promote ecological prosperity through reinvestment in innovation.

● NFTs are not only markets but also symbols of identity and culture, and they are the future tools for protecting creators' rights.

● Stablecoins serve as a bridge connecting Web2 and Web3, transforming traditional assets into Web3 assets and promoting mass adoption.

● Hong Kong has immense potential to nurture a new generation of innovative projects in the Web3 space.

● Hong Kong's Web3 investment ecosystem is rapidly growing; although it is not as large as that of the United States and the Middle East, it has huge development potential.

● Animoca Brands operates in accordance with local regulations, but since it does not handle customer assets, its compliance burden is much lower than that of exchanges.

● Hong Kong is expected to become a global Web3 hub, but more forward-looking actions are needed to maintain competitiveness.

● Hong Kong has tremendous potential for rapid development in Web3 by attracting talent.

● The open metaverse is steadily developing, and platforms like Telegram and the TON ecosystem, along with high-quality Web3 games, will become important game-changers.

● Web3 enhances users' financial literacy, deepening their understanding of the value of capital, assets, and digital ownership.

Full Interview

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

Yat Siu: We utilize blockchain to create digital ownership, as blockchain technology (like that used for Bitcoin) enables true digital ownership. For example, with Bitcoin, if it 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 storage assets (like Bitcoin) to NFTs (non-fungible tokens), which are unique digital identifiers used to identify digital assets such as artworks or game items. NFTs represent the true provenance of digital items, similar to physical items in the real world.

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

Once an item is regarded as a capital asset, it can appreciate in value, and you have certainty of ownership, making it a viable choice for investment. Certainty of ownership is crucial—if you don't have ownership, there is no incentive to invest. For example, in Web2, platforms like Instagram allow you to build reputation, but you do not truly own it; the value belongs to the platform. This is similar to landlords and restaurant owners—after many years of running a restaurant, it is the location, not the business itself, that holds most of the value. However, Web3 allows you to own your digital assets.

Digital ownership opens doors to new business opportunities, allowing people to build services on the assets they own, just as ownership in the real world allows for new service layers such as car rentals or customization. Another aspect of ownership is its cultural value, which reflects identity. Many of the 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, game items and skins carry similar meanings, but currently, we do not truly own them; we rent them. We see that the trillion-dollar market built on digital ownership has immense potential.

As for Hong Kong, it is ideally positioned in this digital ownership revolution due to its market economy framework. Capital relies on ownership, and Hong Kong is one of the most favorable cities for capital globally, understanding the value of ownership and capital. Hong Kong is also a financial hub, similar to New York, Dubai, or Singapore, which are leading in the development of Web3 and blockchain. Hong Kong's financial expertise and support for industry innovation make it a natural leader in this field.

In the face of recent challenges such as competition from Singapore, Hong Kong has the opportunity to define its role as a future financial center by embracing Web3 and blockchain.

MetaEra: It's refreshing to hear about Animoca Brands' leadership in protecting digital rights! This technology and innovation is truly a game-changing force. Since we are discussing technological applications, let's dive into the Web3 economy. What do you think is the most challenging part of building a robust Web3 economic model?

Yat Siu: Animoca Brands contributes to the ecosystem by building, investing, and collaborating in the Web3 space. Although we are not a traditional fund, we are one of the largest investors in Web3, with over 540 investment cases. This makes us one of the largest investors in the overall Web3 ecosystem. Through our investments, we support and nurture entrepreneurs and builders, enhancing the resilience of the Web3 ecosystem.

The spirit of Web3 and blockchain centers on decentralization, which we interpret as widely distributed shared ownership. A well-distributed and decentralized ecosystem fosters fairer competition and a more just market, balancing the competitive environment. In contrast, monopolies typically dominate the market by leveraging their control. Decentralization counters this by redistributing power, creating a fairer and freer market.

We support this vision of a 'shared network', which means that by helping Web3 projects grow, the entire ecosystem will benefit. For instance, if Bitcoin reaches $100,000, the entire Web3 space will benefit, not just Bitcoin holders, leading to increased network value, transactions, and liquidity flows. Unlike Web2, where companies like Facebook or Google primarily benefit themselves from their success, the success of Web3 is shared more broadly, with value permeating throughout the ecosystem.

Investing in Web3 is crucial for this growth. Imagine if every company in Hong Kong invested 5%-10% of its profits into local startups, the startup ecosystem would thrive, similar to the Silicon Valley model. In Silicon Valley, despite sometimes lacking infrastructure compared to Hong Kong, innovation still flourishes due to the high concentration of angel investors. It is not just large funds; individual engineers and employees often invest in multiple projects. This culture of anyone being able to be an investor is precisely what drives innovation.

In contrast, this investment culture is less common in Hong Kong and much of the world. People may prefer to invest in real estate or stocks rather than startups. However, in Web3, most companies and individuals that make profits tend to reinvest in other projects, creating a boosting effect that helps the ecosystem grow.

When it comes to building in Web3, there is no silver bullet, but one core concept is that tokens provide access to network effects. Tokens are network assets, such as Bitcoin, that have financial and application utility, forming dynamics that are fundamentally different from traditional assets. For example, holding shares of Facebook 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 Web3, they are unified: holding tokens makes you a stakeholder in the network.

Owning tokens means you have a stake in the network, not just as a store of value. This network asset is a unique type of asset, akin to owning shares of the network effects themselves. The value of network economies (like the token economy) grows through its users and utility, just like traditional economies. Building in Web3 is fundamentally about creating a network economy, and understanding how to optimize this is entirely different from establishing a typical business model. Many first-time entrants into Web3 may not realize they are creating a network economy; it feels more like forming a nation rather than just running a business.

MetaEra: Building an excellent user experience and community is a very important part! Additionally, NFTs play a core role in this process. Can you tell us about the role of NFTs in the Animoca Brands ecosystem? What are your thoughts on new uses for 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'; this description may not be the most appealing way to explain digital ownership. In the future, I don't believe we will still call it NFTs; we may directly refer to it as 'digital ownership'. That is why we use the term 'digital property rights'. We believe this concept will ultimately become important. However, for now, we need to explain this technology, which is why terms like NFT are still widely used, even if many do not fully understand them.

In general, we view NFTs as the storage of digital culture. They represent value beyond money; they are not currency or stores of value, but rather the storage of culture. Within this cultural storage, there are different types of capital. Financial capital is obvious, but there are other forms, such as symbolic capital (e.g., university degrees), cultural capital (arts and literacy), and social capital (networks and friendships). For us, NFTs capture cultural, social, and symbolic capital. While meme coins may also represent some of these elements, NFTs carry more weight in symbolism and culture. NFTs can be likened to Birkin bags, Picasso artworks, Lamborghinis, Rolexes, and 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 game items. They can also be used for intellectual property (IP), protecting music, dance, or educational rights in the form of NFTs. This allows creators to embed legal protections at a cost of less than a dollar, which is revolutionary. I envision future NFTs being tools for protecting, enhancing, and developing intellectual property. I am not envisioning 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 almost zero five or six years ago. NFTs have truly changed the game in terms of digital rights and transactions, particularly with branded items like NFT Nike shoes, bestowing unique symbolic value.

MetaEra: Animoca Brands has recently secured significant funding. What is the company's future capital operation strategy? What businesses or regions will be prioritized for expansion next?

Yat Siu: Animoca Brands is indeed very active in financing, especially in regions like Saudi Arabia and the Middle East, which, along with the Asia-Pacific region, are growth markets. These regions have an open and friendly attitude towards Web3, making them ideal places for our expansion. In addition to gaming and Web3, we also focus on two main areas: digital identity and education.

We are building reputation in Web3. Reputation is crucial for building trust, as it allows people to conduct business safely without revealing 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 reputations is essential. Imagine doing business repeatedly with strangers in Hong Kong without establishing 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 your new business contacts. This will increase trust, which is a significant factor in our industry.

The second key focus area is education, particularly addressing the student loan crisis. In the United States, this issue has reached $2.2 trillion. We aim to leverage Web3 to provide better student financing solutions, which may help reduce costs and improve returns. These initiatives in digital identity and education will support broader growth in gaming, decentralized finance (DeFi), and the entire Web3 ecosystem.

MetaEra: Animoca Brands is currently actively involved in Hong Kong's stablecoin initiative. How do you view 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: The reason we focus on stablecoins is that Hong Kong currently lacks a stablecoin framework. We are working with Standard Chartered Bank and HKT to create a local stablecoin in Hong Kong to support the local ecosystem and enhance confidence. We believe stablecoins serve as a bridge between Web2 and Web3, making it easier for users to convert assets into Web3 assets, as demonstrated by stablecoins like Tether and Circle. This initiative aligns with Animoca Brands' direction towards becoming an institutional-level Web3 participant, a role that is still lacking and needs further development.

The importance of stablecoins lies in their ability to guide users from Web2 to Web3 on a large scale. Stablecoins allow users to retain their assets in familiar currency forms in Web3 and provide a straightforward way to transfer value. If someone creates value in Web3, converting it into stablecoins is faster and safer than going through exchanges, and it provides flexibility for further transactions or storage.

Our strategy regarding stablecoins also aligns with the idea 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 an IPO in Hong Kong. Given the overall weakening of the Hong Kong capital market, how do you view the impact of Hong Kong's new policies on the company's decision to go public? What specific advantages do these policies bring to the company's market expansion?

Yat Siu: Regarding a potential IPO, as a company headquartered in Hong Kong, there are clear advantages here. Despite a weak capital market, Hong Kong remains one of the largest markets globally. Given that our headquarters are here, choosing Hong Kong is a reasonable decision. Although an IPO takes time, when we are ready, Hong Kong is likely to be an important market for us. Hong Kong is developing more refined crypto policies and clearer regulations, creating good opportunities for our future listing.

MetaEra: Animoca Brands has already 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 sentiment in the Web3 venture capital space, especially regarding discussions around hesitance to invest in projects led by Chinese founders?

Yat Siu: We are seeing rapid growth in Web3 development, with many Chinese founders leading the way. The Web3 model emphasizes property rights and asset frameworks, which align closely with Chinese business thinking, especially among people in Hong Kong and Greater China.

While many founders choose to operate outside mainland China, they have a deep understanding of this model and have established companies in places like Hong Kong and Singapore. Additionally, many well-known overseas Web3 companies are operated by people of Chinese descent or Chinese nationals. This contrasts sharply with Web2, where there were relatively few internationally influential Chinese founders. However, in Web3, the global influence of Chinese founders is quite significant. The world's largest exchanges, such as Binance, OKX, HTX, and Bitget, are primarily founded by Chinese founders, with Coinbase being the only exception. This reflects an important trend: Web3 is attracting a large number of Chinese entrepreneurs, which is very notable. The principles of capitalism in Web3 seem to resonate well with many people's intuitive understanding of this.

The investment community in Hong Kong is much larger and more distributed in the Web3 space than in Web2, meaning that Web3 startups here receive significantly more funding. This funding advantage allows Web3 companies in Hong Kong to grow faster and on a larger scale than Web2 companies. Additionally, many successful Web3 entrepreneurs tend to reinvest their earnings into new projects, creating a natural reinvestment cycle within the community.

While Hong Kong's Web3 investment environment has not yet reached the scale of the United States or the Middle East, it has considerable potential. Hong Kong is wealthy, and the younger generation of family offices shows strong interest in digital assets, Web3, and blockchain. As a global financial center, Hong Kong has a deep understanding of the financial system, which aligns well with the principles of Web3 and blockchain.

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

MetaEra: Animoca Brands' extensive investment strategy is truly impressive! As global interest in blockchain continues to grow, we are also seeing increasing regulatory attention. How does Animoca Brands handle compliance issues in 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 Web3 and the metaverse?

Yat Siu: Regarding regulation, the global framework is still evolving. Although there is currently no clear model, Hong Kong is making progress alongside places like Dubai, Singapore, Tokyo, and Liechtenstein. Most regulatory work is primarily focused on alternative tokens, emphasizing liquid assets, while NFTs are often viewed as consumer assets rather than financial instruments, thus basically not regulated.

In certain markets, we need to assess whether we will operate locally, which naturally requires compliance with local regulations. We have dedicated compliance and legal teams to manage this. However, generally speaking, fields like Web3, gaming, NFTs, education, and digital identity are not subject to strict regulatory requirements. Regulators have clearly stated that these industries fall outside the current regulatory framework, which means our regulatory burden is much lighter than that of exchanges.

Unlike exchanges, we do not handle customer 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 quite different from exchanges, as they must adhere to strict third-party asset custody and management regulations. Therefore, while we comply with local laws in our business areas, our regulatory obligations are not as extensive as those of exchanges.

MetaEra: Animoca Brands' commitment to compliance indeed reflects its focus on sustainable and long-term growth! How do you view Hong Kong's evolving role in the global cryptocurrency landscape? While Hong Kong's luster may have diminished in the Web2.0 era, do you think it has the potential to reclaim its status as the 'Pearl of the Orient' with the rise of Web3.0? Could Hong Kong's new crypto policies become a benchmark for global regulation?

Yat Siu: Hong Kong's goal is to become a global Web3 hub, although there is still much work to be done. To achieve this goal, Hong Kong needs to adopt a more forward-thinking approach than other regions. The city has a rich talent pool in this area, 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 tremendous potential.

Web3 is still in its early stages, and it is impressive to see the companies that have already launched or are building here. Many companies have already grown significantly, which is particularly noteworthy—especially considering that before Web3, Hong Kong was not a major tech hub. Now, Hong Kong truly has a real momentum. However, Hong Kong needs to maintain its growth advantage to remain competitive. Although it is not yet the largest platform—like Dubai and to some extent Singapore remain ahead—Hong Kong's pace of progress is very fast. Attracting more talent will be key to its sustained 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 may have the potential to change the game in the near future?

Yat Siu: The metaverse is still developing, especially in the Web3 area. 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, largely driven by gaming. I believe transformative areas will include platforms like Telegram and the TON ecosystem, which are promoting rapid growth of Web3 products. Due to the lack of restrictions from traditional game distribution channels like Apple, Google, Facebook, and Steam on Web3 blockchain and NFTs, it provides users with a completely new integrated experience.

Another key area is the games themselves, particularly high-quality games that can bridge Web2 and Web3. Right now, we see games enjoyed by Web2 players that they may not even realize are based on Web3. For example, Gunzilla's 'Off the Grid' in our portfolio may compete in popularity with PUBG and Fortnite. Players enjoy this game because it is fun, not necessarily because it is blockchain-based. This way, we can seamlessly introduce Web2 users to Web3 through experiences they already love, like gaming.

As for 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, what I want to convey is that when you transition to Web3 and become a Web3 user, your financial literacy will improve. In other words, you will gain a deeper understanding of money, assets, and digital ownership, while becoming more skilled in managing financial matters. I believe the true revolution of Web3 lies in guiding and educating finance: the transition from Web2 to Web3 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 more competent manager of your portfolio—skills that are often not taught in school, even though money is an essential tool in life. Web3 provides democratized access to financial knowledge and skills. In short, the transition from Web2 to Web3 allows you to enhance your financial literacy and capabilities.