Reporter: Wu Tianyi
Intern reporter: Riley
Produced by: DeThings
From September 18th to 19th, the TOKEN2049 Summit was held as scheduled in Singapore. As a global crypto industry event, Hong Kong and Singapore, which had hosted the summit before, were once again pushed to the two ends of the scale. The advantages and disadvantages of the two places in terms of policy friendliness, attractiveness of scientific and technological talents, and financial infrastructure have become the focus of continuous attention in the industry. There has been a lot of discussion about which of Hong Kong and Singapore will stand out in this competition.
On September 19, HashKey Exchange CEO Weng Xiaoqi accepted an exclusive interview with DeThings at the TOKEN2049 conference. As a licensed cryptocurrency exchange headquartered in Hong Kong, Weng Xiaoqi mentioned in the interview that the regulatory differences between Hong Kong and Singapore make them each have their own characteristics in the development of the Web3 industry. Hong Kong pays more attention to the supervision of exchanges, while Singapore pays more attention to areas such as trade, payments and funds. This difference has formed a certain competitive relationship. For practitioners, Weng Xiaoqi pointed out that "Hong Kong and Singapore have different foundations in scientific and technological talents. Hong Kong has more advantages than Singapore, especially in attracting talents from the mainland. In contrast, most of Singapore's Web3 talents are attracted from all over the world.
In addition, Weng Xiaoqi also said, "As long as the interest rate cuts begin, market sentiment will gradually turn positive in the next year." He said that with the adjustments in the global financial market, especially against the backdrop of the US dollar interest rate cuts, crypto assets will usher in a new round of growth cycle, especially Bitcoin, which has become the focus of major global financial institutions due to its constant supply and long-term investment value.
The following is the transcript of the interview, which has been edited.
“Both Hong Kong and Singapore will remain the global center of crypto assets”
DeThings: What do Web3 practitioners in Singapore think of Singapore's Web3 regulation? What direction will global regulation develop in the future? Weng Xiaoqi: Singapore is one of the earliest countries in the world to support the crypto industry. As early as 2017, Singapore made it clear that token issuance is legal locally. Due to the clear and protective policies, many practitioners have been attracted to come to Singapore to do business. Singapore and Japan took similar actions at the same time (shortly before and after), thus establishing their important position in the global Web3 field.
However, it is worth noting that Japan and Singapore have different regulatory stances and policies. Japan adopts a strict and clear regulatory framework, while Singapore is relatively loose. Singapore's loose regulatory attitude is closely related to its role as a global trade hub and its long-term policy orientation of encouraging foreign investment. Therefore, Singapore appears to be more open to allowing legal token issuance. At that time, many project parties who planned to issue tokens would choose to register companies or offshore companies in Singapore and issue tokens in accordance with Singaporean law.
The reason for setting up token foundations and governance structures in Singapore was originally due to this relaxed regulatory environment. Due to the unclear regulatory framework or opposition to cryptocurrencies in other regions, many practitioners moved to Singapore, which quickly made Singapore stand out in the Web3 field and become an important center for Web3 in the world.
However, affected by the FTX incident, Singapore's regulatory attitude has become more conservative in the past two years. In fact, the global regulatory trend is also moving towards more compliance. The most representative regions are Hong Kong, as well as Dubai and Abu Dhabi in the United Arab Emirates. Next, Europe may also move towards compliance, and the global market will gradually move from disorder to standardization. The policy direction of the United States has attracted much attention, especially if Trump returns to power, which may accelerate the formulation of relevant laws. Therefore, supervision around the world is gradually entering an era of compliance.
For a long time, there has been no clear timetable for the compliance process in the industry. However, an important turning point is that the United States has increased its supervision of several major cryptocurrency exchanges and has taken strict measures against exchanges that did not pay attention to compliance in the early days, and even pursued criminal liability. This has made people inside and outside the industry realize that regulation has entered a new stage. In fact, since the International Anti-Money Laundering Organization began advocating global regulation of cryptocurrencies in 2018, the purpose is to prevent the abuse of cryptocurrencies by money laundering, terrorist organizations and transnational crimes.
Although this initiative started as early as 2018, many countries around the world did not really take this issue seriously until the United States strengthened its regulation of cryptocurrencies and the global regulatory situation began to change. More and more countries are taking action, from France to Nigeria in Africa, and to many other countries, large and small countries are beginning to regulate cryptocurrencies.
Many countries have not only strengthened supervision at the legal level, but have also begun to investigate related illegal acts from the perspective of criminal liability.
The year of compliance for the entire industry, the cryptocurrency industry around the world has gradually moved towards compliance. In the past, the industry used to operate in a gray area, but now, compliance has become an unavoidable requirement. The development of many industries in the past has gone through gray areas, and the banking industry is no exception. For example, in Chinese history, the earliest ticket or money house developed from a folk order without formal regulations.
Take Shanxi Piaohao as an example. At that time, it was inconvenient for businessmen to remit the money earned from all over the country back to Shanxi, so Piaohao was set up in various places, forming a set of private financial system. Piaohao later developed into a large-scale chain enterprise, the most famous of which was Rishengchang. Its founder Lei Lutai guaranteed the Piaohao with his personal reputation, which is similar to the personal guarantee model of the founders of cryptocurrency exchanges today. However, any enterprise will face cyclical challenges, including the enterprise's own cycle, economic cycle and political cycle, and eventually Piaohao failed to continue. Subsequently, the state realized the needs of the industry and began to issue licenses and conduct standardized management, so that the industry could develop healthily. This history is very similar to the development path of the cryptocurrency industry today.
Starting from 2023, global regulation has gradually tightened, and compliance has become the mainstream trend of industry development. Today, major exchanges around the world have begun to shrink their businesses even in non-compliant markets, or close risky business markets. For example, many large exchanges have closed their businesses in Turkey, Nigeria, France and other places, while actively deploying in licensed markets.
DeThings: Can you explain what is "non-compliant"? For example, if a platform party also participates in transactions within the platform and profits from them, is this considered non-compliant?
Weng Xiaoqi: From a compliance perspective, for example, Hong Kong's regulatory requirements require that platforms can only act as trading intermediaries and are not allowed to participate in trading activities. In the FTX incident, the platform misappropriated user assets, and the platform assets and user assets were not effectively separated, which was a non-compliant behavior. After the incident, licensed exchanges such as Hong Kong's regulatory agencies (such as the Securities and Futures Commission) will conduct regular inspections to ensure that platform assets and customer assets are separated, and that the regulatory mechanism can effectively prevent the platform from accessing user funds. These key lessons have gradually been absorbed into the regulatory framework, forming stricter systems and rules.
The current global regulatory trend is that the non-regulated market is gradually shrinking, while the share of the licensed market is gradually expanding. If the US ETF is also regarded as a form of licensed exchange, it can be foreseen that in the next two to three years, the market share of global licensed exchanges may exceed 50%.
In the past, the regulation of various countries was mainly aimed at the illegal securities market, and now the regulation of cryptocurrencies is mostly derived from the crackdown on illegal securities. When the United States rectified the industry, the first core question it raised was: "Are the assets you issue securities?" If they are securities and are not registered, then they are illegal.
Looking to the future, both Hong Kong and Singapore will remain the center of global crypto assets and will continue to optimize and improve relevant laws and regulations. Although Singapore suffered some blows from the FTX incident, it still realizes the importance of the crypto industry to the country. The development of Web3 has brought significant economic benefits, especially in terms of consumption and trade. The surge in hotel prices and consumption in Singapore proves the importance of this industry to Singapore.
DeThings: From your observation, do you think Singapore's regulation still regards the crypto industry as an important industry? How does Singapore's regulatory attitude compare to Hong Kong's?
Weng Xiaoqi: We actually have a deep layout in Hong Kong and Singapore, and we both hold relevant licenses. Singapore's policy was initially more radical and open, and although Hong Kong was positive, it did not make a clear statement at first. It was not until 2022 that Hong Kong began to clearly release relevant policies. In 2022, Singapore was affected by the FTX incident and its policies were somewhat shrunk. As a result, Hong Kong took more steps in regulation, giving people a more positive impression of Hong Kong.
However, with the implementation of some Hong Kong policies in 2023 and 2024, some global practitioners began to feel that Hong Kong's regulation was too strict. Hong Kong's advantage lies in its status as one of the global financial centers, with a mature financial regulatory system and strong competitiveness in attracting capital. But because of this, its regulatory process also appears to be too cautious and lacks certain flexibility compared to Singapore.
However, Hong Kong has recently realized the importance of the crypto industry and has begun to accelerate its opening up. For example, Hong Kong used to only allow retail investors to trade Bitcoin and Ethereum, but recently added two new currencies and plans to open up more currencies. In addition, Hong Kong has launched a regulatory sandbox for Hong Kong dollar stablecoins and promoted the relevant supervision of central bank digital currencies (CDBC). These measures show that Hong Kong's position in the Web3 field is becoming increasingly important.
Hong Kong also quickly launched the first Ethereum ETF to compete with the United States in this field. This also marks that Hong Kong is playing an increasingly important role in Web3 and the financial field. Compared with Singapore, Singapore will be more cautious after a setback, but it is also seeking a balance between openness and regulation. In the next five years, the global compliance trend will become more obvious, and a flexible regulatory environment will bring advantages to various regions. Both Hong Kong and Singapore have flexibility, so the prospects are worth looking forward to.
DeThings: Do Hong Kong and Singapore have different business focuses? Is there any competition between the two places?
Weng Xiaoqi: The business competition between Hong Kong and Singapore is very obvious. Many practitioners are considering whether to stay in Singapore or move to Hong Kong. This trend of one rising and the other falling is particularly prominent in the short term. I think Hong Kong's current focus is on exchange supervision, because Hong Kong already has a mature exchange business system, such as the world-renowned platform such as the anti-exchange. Singapore does not have such a large industry in securities trading, and may pay more attention to trade, payment, funds and OTC transactions. Therefore, the two places have different business focuses. The first phase of Hong Kong's supervision is mainly aimed at exchanges, including existing on-site transactions and OTC transactions. Hong Kong's regulatory system is brewing for the Securities and Futures Commission and the Customs to jointly assume some regulatory responsibilities, which is an important difference from Singapore.
DeThings: So as a practitioner, how do I choose the right location? If Hong Kong is currently focusing on the regulation of exchanges, will it bring about a problem that participants are limited to companies with certain backgrounds? For example, if I write an excellent DeFi program, but I don’t have an exchange background, will I be unable to enter this market?
Weng Xiaoqi: For practitioners, Hong Kong does not prohibit non-exchange Web3 applications, but encourages these innovations. However, since exchanges are more strictly regulated, if you are engaged in this field, you will be subject to more restrictions. For example, DeFi is an innovative application encouraged in Hong Kong. You need to consider more about the management radius, management costs, and where your target market is. In terms of development convenience, is it better in Hong Kong or Singapore? It also depends on how much you value scientific and technological talents.
Hong Kong and Singapore have different foundations in technology talent. Hong Kong has more advantages than Singapore, especially in attracting talent from the mainland. For example, the geographical advantages of Shenzhen and Hong Kong allow the two places to develop collaboratively through the "front shop and back factory" model, that is, the R&D body is in Shenzhen and the store is in Hong Kong. This collaborative model gives Hong Kong a better foundation in terms of talent hinterland in the Greater Bay Area. In contrast, most of Singapore's Web3 talents are attracted from all over the world, and the foundation is relatively weak. Therefore, if you value R&D, Hong Kong may be a better choice.
“Is Web3 compromising with traditional finance, or is traditional finance forced to embrace Web3?”
DeThings: How to ensure the overall liquidity of the market under current and future regulatory conditions?
Weng Xiaoqi: This is related to the issue of the US dollar interest rate cut we are discussing today. In the past two years, the main trend of global monetary policy has been the US dollar interest rate hike. The effect of the interest rate hike is to attract global funds to the United States. Therefore, the performance of global financial assets including Crypto ETFs is not satisfactory, and market liquidity is suppressed. The only exception is gold, but there are many other factors for the rise of gold, such as war, geopolitics, etc.
However, as more and more sovereign countries begin to sell off U.S. debt and the U.S. dollar, trust in the U.S. dollar is gradually decreasing. Once interest rates are cut in the future, especially when interest rates fall below 2%, the stock markets and other financial assets in emerging markets around the world may usher in a new round of bull market, and the Crypto market is no exception. The long-term value of Bitcoin will become more apparent, because the total amount of Bitcoin is constant, 21 million will not increase, and due to the loss of private keys and other reasons, the actual circulation of Bitcoin is still decreasing.
This year, various funds in the United States are increasing their Bitcoin layout, and these layouts have made large purchases in the range of 10,000, 20,000, 30,000, and 40,000 US dollars. Therefore, when the US dollar begins to cut interest rates and inflation picks up, their average purchase price will be lower than that of other financial institutions that enter the market later, which will give them a competitive advantage.
DeThings: If the Fed cuts interest rates by 25 or 50 basis points, what impact will that have on the price of Bitcoin?
Weng Xiaoqi: In the short term, the market's reaction to rate cuts will be different. If the rate cut is 50 or even 75 basis points, the market will react more positively. If it is 25 basis points, the market may be neutral. But as long as the rate cut begins, market sentiment will gradually turn positive in the next year, driving ETFs to increase liquidity.
DeThings: Back to the historical question, as Bitcoin is strongly correlated with US dollar interest rate cuts, does it mean that Bitcoin has lost its original decentralized and anarchist color?
Weng Xiaoqi: Not really. In fact, this is a classic question. Last year, during the discussion on the approval of the Bitcoin ETF by the United States, there was a heated debate in the industry: Is Web3 compromising with traditional finance, or is traditional finance forced to embrace Web3? At present, it is more of the latter, that is, traditional financial institutions have to accept Web3. Traditional financial institutions exchange their US dollars for Bitcoin because they expect the long-term value of Bitcoin to be higher than that of the US dollar. This is not Web3 bowing to traditional finance, but rather a victory for Web3, marking that Bitcoin replacing part of the US dollar value has become an irreversible trend.
The infrastructure is gradually improving, and the potential of Web3 will be gradually released.
DeThings: In addition to interest rate cuts, what other areas is the industry paying attention to?
Weng Xiaoqi: The interest rate cut reflects the financial attributes of Web3 and shows its linkage with the traditional financial industry. Therefore, the financial attributes are a key focus. In addition, the industry is more looking forward to seeing the implementation of Web3 application scenarios. For a long time in the past, many people believed that Web3 products were just empty tokens used to cut leeks, but now more and more effective scenarios are beginning to emerge.
For example, GameFi and cross-border payments have already been put into practical use, and DeFi is also being integrated with the traditional financial industry. We are now waiting to see who will fire the first shot of change.
DeThings: NFT was once all the rage, but then the market cooled down. What do you think of this phenomenon?
Weng Xiaoqi: The popularity of NFT is, to some extent, a misunderstanding of the traditional collectors entering the crypto field. Many traditional collectors enter the cryptocurrency circle to make money, causing the market to bubble in the short term. However, the applications that are native to the Crypto world are truly valuable in the long term. In the future, as more applications with real value are implemented, Web3 will enter a new stage of development.
DeThings: So, the discussion within the industry is more focused on how to effectively integrate blockchain with other industries?
Weng Xiaoqi: Yes. What is worth looking forward to in the future is the widespread application of blockchain technology, so that ordinary users can have blockchain-related applications on their mobile phones. This will be a turning point in the development of the industry, similar to the explosion of the Internet. The Internet experienced a bubble period from 2000 to 2003, and many people went public with PPT, but as the bubble burst, the true value of the Internet industry gradually emerged. I think Web3 is now in a similar early stage.
DeThings: If compared with web2, what stage has the development of Web3 reached now?
Weng Xiaoqi: The current development stage of Web3 is roughly equivalent to the Internet around 2000, which is in its early stages. At that time, the Internet infrastructure was not yet complete, and many countries were discussing whether to ban the Internet. Today, Web3 is also facing similar challenges. Although there are not many applications yet, the infrastructure is gradually being improved. In the future, as the technology matures and the supervision is clarified, the potential of Web3 will be gradually released.
After several upgrades, Ethereum’s on-chain performance has been close to processing tens of thousands of transactions per second, and there are hundreds of thousands of nodes participating around the world, which is like the popularization of broadband in the early days of the Internet. We are in a stage where technical facilities are gradually improving, and the prospect of explosive application has emerged.
