Author: Zhu Haokang
This article represents the author's personal views. Author's Introduction: Zhu Haokang, currently the Head of Digital Asset Management at Huaxia Fund (Hong Kong) and Head of Family Wealth Management. Successfully issued Asia's largest Bitcoin and Ethereum spot ETFs in 2024, actively participated in central bank digital currency and stablecoin sandboxes, and promoted the compliant issuance of RWA tokenized funds. Founded the Asia RWA Working Group in 2023, appointed as a member of the Hong Kong government's Cyberport Entrepreneurship Advisory Committee and a judge for the Innovation and Technology Incubation Fund. Previously served as Executive Director in the Securities Division of Goldman Sachs, completing over a hundred IPOs and secondary market financing projects during his tenure in New York, Boston, and Hong Kong. Currently pursuing a Ph.D. in Financial Technology at Hong Kong Polytechnic University, he has long provided advice to regulatory authorities on virtual assets in the mainland and Hong Kong. Published the world's first Chinese book on RWA (RWA and Tokenization) under the auspices of the Chinese Ministry of Finance's publishing house.
Review 2024: Significant Progress in Hong Kong's Web3.0 Ecosystem
In 2024, significant progress has been made in the development of Hong Kong's Web3.0 ecosystem, including the issuance of virtual asset spot ETFs, approval of trading platforms, and release of tokenized asset sandboxes, attracting global institutional participation. On April 30, six virtual asset spot ETFs were listed on the Hong Kong Stock Exchange. Currently, the Bitcoin and Ethereum spot ETFs issued by Huaxia Fund (Hong Kong) rank first in Asia, with the Huaxia Bitcoin spot ETF exceeding 2 billion HKD in size within the year, and a single-day trading volume exceeding 370 million HKD on December 5. By the end of 2024, the SFC has approved seven licensed virtual asset trading platforms, including OSL Exchange, HashKey Exchange, HKVAX, Cloud Account Greater Bay Area Technology (Hong Kong), DFX Labs, Hong Kong Digital Asset Trading Group, and Thousand Whales Technology.
In the area of tokenized assets, the Hong Kong Monetary Authority (HKMA) issued a circular in February 2024 (on the sale and distribution of tokenized products) to strengthen the management of institutions launching tokenized products; the Securities and Futures Commission (SFC) expressed in May that it may open up investment in real-world asset (RWA) tokens to retail investors, attracting global capital and enterprises. In August, the HKMA launched the Ensemble sandbox program to promote tokenized asset trading, with Ant Group and Longshine Group collaborating to complete the first domestic financing for the tokenization of new energy physical assets, with a financing amount of approximately 100 million RMB. In September, the HKMA launched the 'Digital HKD+' project to explore new digital currency innovation use cases, such as tokenized asset settlement, programmability, and offline payments.
In terms of stablecoins, the HKMA released a consultation paper in January 2024, clarifying the definition of fiat-backed stablecoins; in March, the HKMA officially launched a regulatory sandbox for Hong Kong dollar stablecoins, providing an effective channel for exchanging opinions on proposed regulatory systems between the HKMA and the industry. Industry organizations such as the Asia RWA Working Group submitted a draft consultation on the issuance of stablecoins to the HKMA. In July, the HKMA published a report on the results of the consultation on the legislative proposals for the implementation of the regulatory system for Hong Kong stablecoin issuers, clearly accepting tokenized forms of reserve assets, and announced the first batch of sandbox participants, including: Yuan Coin Innovation Technology, JD Coin Chain Technology, and a joint company established by Standard Chartered Bank, Anheuser-Busch InBev, and Hong Kong Telecom. On December 6, the Hong Kong government published the draft Stablecoin Regulation, which was read for the first time in the Legislative Council on the 18th, aiming to improve the virtual asset regulatory framework and consolidate Hong Kong's position as a global center for the development and regulation of stablecoins.
The world is accelerating the promotion of Web3.0 development.
In 2024, countries are actively promoting Web3.0 development. In May, the United States passed the Financial Innovation and Technology Act of the 21st Century (FIT21), establishing a clear legal framework for digital assets; in November, it proposed the Clear Payment Stablecoin Act aimed at establishing a comprehensive regulatory system for payment stablecoins. The incoming U.S. President Trump’s high attention and support for cryptocurrencies ignited market enthusiasm, leading to a strong growth wave in the cryptocurrency market, which, on December 5, exceeded the $100,000 mark, breaking historical records. On December 6, Trump appointed David O. Sacks as the White House Director of Artificial Intelligence and Cryptocurrency Affairs. Sacks advocates for loose regulation and promises to establish a favorable policy framework for the U.S. crypto industry. On December 15, Trump proposed to reinforce the U.S.'s position in the global crypto market through a national-level Bitcoin strategic reserve and expressed support for reducing the tax burden on cryptocurrency companies to attract more capital and innovative technologies.
The EU passed the world's first comprehensive regulation on the supervision of crypto assets and related services in June 2023—the Markets in Crypto-Assets Regulation (MiCA)—aiming to provide legal clarity, promote innovation, and protect investors from risks. This regulation will come into full effect by the end of December 2024, aiming to provide legal clarity, promote innovation, and protect investors. Recently, some exchanges have announced that they will delist certain stablecoins that do not comply with MiCA regulations in the EU. The Monetary Authority of Singapore approved Paxos to launch the USD stablecoin USDG in July, managed by DBS Bank, promoting the application of stablecoins in payment and settlement. On July 18, South Korea's 'Virtual Asset User Protection Law' went into effect, requiring exchanges to store 80% of user deposits in cold wallets and to purchase sufficient insurance against hacking attacks. The UK House of Lords supported the 'Digital Assets Property Bill' on November 7, providing a legal protection framework for cryptocurrencies. In December, the Japanese government proposed a reform proposal for the cryptocurrency income tax system, reducing the personal cryptocurrency income tax rate from 55% to 20%, attracting international cryptocurrency enterprises and investors.
Opportunities and Challenges in Hong Kong's Web3.0 Ecosystem
Looking ahead to 2025, Hong Kong's Web3.0 ecosystem is facing unprecedented opportunities and challenges. We need to fully leverage the institutional advantages of 'One Country, Two Systems' for steady and long-term development. Promoting the development of emerging industries not only requires a strict licensing system and a sound regulatory framework but also needs to gather capital, talent, and technological resources. These elements are the foundation for industry growth and cannot be lacking. Capital provides the impetus for Web3.0 innovation, talent injects wisdom, and technology is key to breakthroughs and efficiency. Hong Kong's Web3.0 industry needs to mature from its nascent stage to a mature one under the synergy of these elements, securing a place in the competition. The author suggests several ways to promote Hong Kong as a global center for Web3.0 industry development.
1. Virtual Asset ETF: Expanding Market Scale
As of the end of 2024, the scale of Hong Kong's spot Bitcoin ETF is $400 million, significantly lower than the $105.4 billion in the U.S. This reflects the U.S.'s first-mover advantage in the virtual asset market, mature investor base, and complete ecosystem. Although Hong Kong is an international financial center, there is still room for improvement in sales channels, investor participation, and product innovation. To narrow the gap, Hong Kong needs to optimize regulatory policies to attract more institutional investors and strengthen market education and investor protection. In addition, Hong Kong can leverage its close ties with the mainland to explore the 'Digital Asset Link' mechanism, allowing qualified mainland investors to invest in Hong Kong's virtual asset ETFs and security tokens. The 'Digital Asset Link' can learn from the 'Stock Connect' model, setting an annual investment quota (e.g., 5 billion RMB) and requiring investors to meet entry thresholds through asset size or risk assessment tests. At the same time, blockchain technology should be used to enhance transaction transparency and regulatory efficiency, ensuring that fund flows and transaction records are traceable, thereby promoting the healthy development of the virtual asset market. Mainland investors' funds flowing through the 'Digital Asset Link' need to undergo cross-border fund regulation and anti-money laundering review. To prevent excessive speculation, set an annual investment cap for qualified investors (e.g., 100,000 RMB). Establish investor entry thresholds, requiring investors to have a certain scale of financial assets (e.g., 1 million RMB) or pass a cryptocurrency risk assessment test. Prioritize opening to institutional investors, gradually expanding to individuals. Relying on the infrastructure of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, build a 'Digital Asset Link' trading system to support mainland investors in conveniently investing in Hong Kong's virtual asset spot ETFs and security tokens. Use blockchain technology to enhance transaction transparency and regulatory efficiency, ensuring that fund flows and transaction records are traceable. Through these measures, promote the healthy development of the digital asset market.
2. Compliant Stablecoins: Promoting RMB Internationalization
Stablecoins, as new digital payment tools, play an important role in cross-border payments and trade settlements. The scale of USD-based stablecoins continues to break through, with global stablecoin trading volume exceeding $5.1 trillion in the first half of 2024, approaching Visa's $6.5 trillion during the same period, with an increase of $3.1 trillion in the third quarter. Governments around the world are launching stablecoin licensing systems, and Western fintech giants such as PayPal and Revolut are actively responding by launching stablecoins. Although the scale of Tether's USDT has surpassed $140 billion, accounting for 66% of the stablecoin market share, Tether is not regulated by most countries and regions. The mainland and Hong Kong should support the issuance of Hong Kong dollar and RMB stablecoins and connect with the digital RMB, encouraging foreign trade enterprises in the Greater China region and Belt and Road countries to use the Hong Kong Monetary Authority-approved Hong Kong dollar or RMB stablecoins, which can enhance cross-border trade settlement efficiency, reduce costs, and promote RMB internationalization and regional financial cooperation. To this end, it is necessary to promote from three aspects: cross-border settlement, expansion of application scenarios, and regulatory guarantees.
In cross-border trade settlement, a blockchain-based stablecoin settlement platform can be piloted in key areas such as the Guangdong-Hong Kong-Macau Greater Bay Area and the Yangtze River Delta, supporting Hong Kong dollar and RMB stablecoin payments, achieving instant settlement, and reducing intermediary links. The pilot scope will prioritize covering cross-border e-commerce, supply chain enterprises, and state-owned enterprises engaged in bulk commodity trade, setting an annual total quota (e.g., 50 billion RMB) and a per-enterprise cap to ensure controllable risks. Provide policy incentives such as fee reductions and tax benefits, and launch training programs to help enterprises familiarize themselves with the processes.
At the same time, explore the integration of stablecoins with digital RMB to enhance payment convenience and expand application scenarios, such as supporting cross-border e-commerce platforms to deploy stablecoin payments, addressing payment delays and exchange rate fluctuations, and promoting the internationalization of the RMB. Hong Kong can support the issuance of RMB-denominated stablecoins to broaden their international trade application scenarios. Encourage fintech companies to collaborate with traditional financial institutions to build infrastructure and promote innovative cooperation. For example, in 2024, Stripe acquired the U.S. stablecoin infrastructure company Bridge for $1.1 billion, and the UK stablecoin aggregation sales platform BVNK completed a $50 million financing, valuing it at $750 million. The Asian version of BVNK—Hong Kong-based fintech company AlloyX—recently completed a multi-million dollar financing and launched a multifunctional wallet supporting stablecoins, providing a one-stop service for account management, currency exchange, and payment settlement, while introducing stablecoins into bulk trade supply chain finance to reduce transaction costs and default risks through smart contracts.
Finally, establish a cross-border regulatory mechanism between the mainland and Hong Kong, using blockchain to achieve traceability of fund flows and real-time monitoring of large and high-risk transactions. Improve anti-money laundering and anti-terrorism rules, strengthen AML and KYC compliance, and promote information sharing. The initial pilot will focus on cross-border trade, e-commerce payments, and supply chain finance in the Guangdong-Hong Kong-Macau Greater Bay Area, gradually expanding. Strengthen technical security guarantees, conduct regular audits, and provide security guidelines to enhance risk prevention capabilities. Through the above measures, the Hong Kong dollar and RMB stablecoins will inject new momentum into cross-border trade and the internationalization of the RMB.
3. RWA Asset Tokenization: Reshaping Investment and Financing Models
Tokenization technology is driving global financial transformation, converting real-world assets (RWA) such as funds, photovoltaic power plants, carbon assets, and real estate into easily divisible and rapidly transferable digital tokens, supporting 24/7 low-cost trading worldwide. This model not only makes asset transactions more efficient and convenient but also lowers investment thresholds, providing new solutions for capital allocation and inclusive finance. Boston Consulting Group predicts that the global tokenized asset scale will reach $16 trillion by 2030. Wall Street financial giants are competing to launch RWA tokenization products. For example, Goldman Sachs's GS DAP platform successfully helped the European Investment Bank issue digital bonds as early as 2021; BlackRock launched the tokenized private equity fund BUIDL on Ethereum, allowing investors to trade tokens year-round while earning returns. By the end of 2024, the scale of BUIDL has exceeded $550 million. To encourage mainland enterprises with financing needs and quality asset targets to raise funds in the Web3.0 industry through compliant tokenized securities laws and virtual asset trading platforms in Hong Kong, the following measures can be taken:
First, Hong Kong should fully leverage its advantages as an international financial center and actively improve the legal and regulatory framework for tokenized securities. For RWA assets such as photovoltaic power plants, data centers, carbon assets, and high-quality commercial real estate, Hong Kong can collaborate with relevant industry institutions in the mainland to develop standardized tokenization schemes to help enterprises reduce financing and time costs. Secondly, Hong Kong should deepen cooperation with mainland regulatory authorities to promote the connectivity of financial markets in both regions. Through mechanisms such as 'Digital Asset Link', qualified mainland investors can conveniently participate in tokenized securities trading in Hong Kong, thereby enhancing liquidity and depth in the Hong Kong market.
At the same time, professional institutions in Hong Kong can provide legal and financial consulting services for mainland enterprises regarding Hong Kong RWA tokenization, helping them familiarize themselves with the issuance and trading processes of tokenized securities. The mainland and Hong Kong should jointly promote the research and application of blockchain technology and smart contracts. Through technological innovation, develop smart contracts to automate profit distribution, asset management, and risk control, enhancing the transparency and efficiency of asset management while reducing transaction costs. Both regions should strengthen market education and investor protection. Hong Kong can enhance mainland enterprises' and investors' understanding of tokenized securities by holding seminars, training courses, and promotional activities. For example, the author published a book (RWA and Tokenization - Investment and Financing Transformation in the Web3.0 Era) in October 2024 with the Chinese Financial and Economic Publishing House, providing an in-depth interpretation of the RWA industry to help investors understand the characteristics and risks of related assets.
Finally, Hong Kong needs to establish a sound investor protection mechanism to ensure that investors' rights are effectively safeguarded. Hong Kong should also actively participate in international financial cooperation to promote the global standardization and mutual recognition of tokenized securities. By collaborating with international financial organizations and regulatory agencies, Hong Kong can facilitate the global circulation and trading of tokenized securities, expanding international financing platforms for mainland enterprises. For assets such as photovoltaic power plants, data centers, and high-quality commercial real estate, Hong Kong can collaborate with international energy agencies, carbon exchanges, data center associations, and real estate investment institutions to promote the formulation of global tokenization standards for these assets, enhancing their international recognition and liquidity.
Looking ahead, Hong Kong has unique advantages in the construction of the Web3.0 ecosystem. By improving the legal and regulatory framework, promoting technological innovation, deepening international cooperation, and strengthening market education, Hong Kong is expected to become the preferred platform for mainland enterprises to conduct tokenized securities financing. As a member of the Hong Kong government's Cyberport Entrepreneurship Advisory Committee and a judge for the Innovation and Technology Incubation Fund, I have noticed that an increasing number of global Web3.0 technology entrepreneurs are choosing to land in Hong Kong over the past two years. If the 'Digital Asset Link' mechanism and the Hong Kong dollar and RMB stablecoins can fully leverage the institutional advantages of 'One Country, Two Systems' to serve the immense market demand of the mainland, Hong Kong will not only attract more international capital and top talent but will further consolidate its position as a global financial center. With the synergy of capital, technology, and talent, Hong Kong will undoubtedly seize opportunities in the Web3.0 era, riding the waves of the global digital economy.
