Hong Kong Web3 wants to wear the crown, how can banks bear the burden of compliance?

Original text produced by: Okey Cloud Chain Research Institute

Original Author: Bi Lianghuan

Recently, virtual asset trading platforms have faced difficulties in opening bank accounts in Hong Kong, which has caused continuous exchanges between the Hong Kong Monetary Authority; HKMA; and banks. What concerns do banks have? The financial industry chooses banks as one of the important gatekeepers to prevent financial crimes including money laundering risks, but they cannot use traditional anti-money laundering methods to deal with the money laundering risks brought by new technologies. The risk of money laundering should not be underestimated. United Nations statistics show that the annual amount of money laundering in the world has reached 800 billion to 2 trillion U.S. dollars, accounting for 2% to 5% of GDP. In "2022" alone, global financial institutions have been fined more than $8 billion for anti-money laundering-related violations.

Not only financial institutions in Hong Kong are facing such problems, but with the increasing complexity of the global economy, the rapid development and application of financial technology such as new financial business and transaction methods, global compliance supervision is also facing unprecedented challenges and opportunities. Financial institutions no longer only need to follow traditional regulations and regulatory standards, but also need to deal with regulatory challenges brought about by emerging technologies and business models, which has increasingly high requirements for compliance technology. Advanced compliance technologies such as artificial intelligence, big data, and blockchain are all important areas of recent compliance technology applications and the attention of the global financial industry.

Is the bridge, but also the gatekeeper

The Web3 industry is booming at a compound annual growth rate (CAGR) of more than 40%, which is 4; times that of the asset management industry and nearly 2; times that of the Internet (software service) industry . Under the macro situation full of uncertainties, the high-growth industry has naturally become the target market of many business giants and the financial industry. ;184; million dollars in revenue. Financial institutions are also eager to try: JP Morgan; its blockchain company; Onyx; launched four products late last year, including; .

Source: OKG Research

As more and more industries hope to gain new growth momentum in the Web3 field, the Hong Kong government has also taken advantage of the trend and has taken frequent actions since the beginning of 2023 to promote the orderly advancement of the Web3 market with a sound and clear regulatory framework. And encourage Web3 to enter other industries to continuously integrate and collide, and stimulate new potential energy for economic growth. In March of this year, Okey Cloud Chain (01499.HK) provided advice to the Hong Kong Securities Regulatory Commission (SFC) on the "Guidelines Applicable to Virtual Asset Trading Platform Operators" and presented solutions in detail. From June 1st, Hong Kong SFC officially implemented the "Guidelines Applicable to Operators of Virtual Asset Trading Platforms" and "Guidelines for Combating Money Laundering" (hereinafter referred to as "Guidelines"), which were finally issued based on suggestions from various parties. . From now on, Hong Kong; SFC; begins to accept virtual asset trading platform operators to apply for licenses, and allows retail investors to use licensed virtual asset trading platforms. If there is no regulatory guidance and no statement on the compliance of virtual assets, it will be difficult for virtual assets to be accepted and applied in the real world, and eventually become an isolated, closed and fragmented industry, and it is difficult to form a scale effect.

According to the guidelines of the Hong Kong government, all walks of life are also proceeding cautiously under the compliance framework. According to Reuters, Hong Kong's banking regulator said on June 15 that it had asked banks operating in the region in April this year to try to meet the business needs of licensed virtual asset trading platforms. The early development of this business is relatively slow. One of the reasons is that virtual assets and blockchain technology have the characteristics of anonymity and decentralization. Web3 supervision and compliance will be more complicated. Moreover, funds in the Web3 field are no longer transferred through bank accounts, but between addresses on the chain. Some applications such as coin mixers and anonymous wallets will increase the concealment of transactions. Therefore, the traditional "AML" regulations and measures will be invalid in Web3. The methods that have been used for many years are not effective in the face of new technology, which makes some organizations daunted.

How did it land? How can a company with a mature business model push its business into the Web3 industry in an orderly, effective and confident manner? How will Web3 quickly adapt to traditional business? In order to ensure the seamless integration of compliance and the real world, the development of the Web3 industry needs compliance technology as a bridge to link Web3 and the real world, so that enterprises can open up new business segments more confidently and effectively. For some new technologies such as financial crimes including money laundering risks, compliance technologies such as; Onchain AML; and gatekeepers, just like banks reviewing customer accounts and guarding the gates for traditional finance, resisting unknown external risks.

Onchain AML handed over such an answer sheet

How does Web3 comply with regulations and seamlessly connect with the wider market? How can traditional financial institutions legally incorporate new businesses or even try new business models? In the "empty window period" of compliance, is there a mature new solution to replace the old method? Okey Cloud Chain Holdings (01499.HK) handed over a "RegTech" answer sheet summarizing years of practical experience in the Hong Kong Greenwich Economic Forum. Not only does Web3 require compliance technology, RegTech is also widely used in financial technology. According to Yahoo Finance, it is estimated that by 2029, RegTech's market size will reach from 2022; 6.5 billion US dollars to 28.83 billion US dollars.

The world has begun to try to apply; RegTech; technology in the Web3 field, such as the US Federal Bureau of Investigation (FBI) and the US Department of Homeland Security (DHS) have used Web3 compliance technology to track and combat suspected money laundering and terrorist financing the behavior of. Mainland China has also applied the technology solutions of OKLink Onchain Holdings (01499.HK) to combat financial crimes in the Web3 field, and launched a set of "OKLink Onchain AML" scientific solutions based on these experiences. On the 15th, it was officially released at the Hong Kong Greenwich Economic Forum. The application of compliance technology in Hong Kong is also continuously expanding the market size. In the latest "AML Regtech: Network Analysis" report of the Hong Kong Monetary Authority this year, it was pointed out that the adoption rate of compliance technology has increased from; 34%; (2019; annual statistics) To; 60%; (2022; Statistics).

Source: "AML Regtech: Network Analysis" Hong Kong Monetary Authority,;2023;Year;May;Month;9;Day

Zhang Chao, vice president of Okey Cloud Chain Group and executive director of Okey Cloud Chain Holdings (1499.HK), said at the Greenwich Economic Forum, "Compliance is not cost, but value. A good compliance technology solution can help Enterprises in the new digital era create sustainable value and maintain a competitive advantage." Especially in a macro environment full of uncertainties and technological upgrades, "compliance technology can enable fast-growing new technology companies, especially high-growth companies. Adapting to this ever-adjusting regulatory environment will allow companies to stay in the chess game of new industries for a long time and enjoy the benefits of the wind."

The report, "AML Regtech: Network Analytics," published by the Hong Kong Monetary Authority in May; 2023, also states that banks are hiring external vendors because they lack the in-house technical skills to develop in-house network analytics capabilities , and the desire to accelerate the adoption of web analytics through external industry knowledge and experience. Banks must consider the vendor's experience implementing web analytics in specific domains such as; AML/CFT; and the technical maturity of their solutions in a potentially fragmented data environment. As the OKLink Onchain AML technology solution that supports the most public chains in the world, its core competitiveness lies in its data capabilities. For example, it has accumulated more than 3 billion address tag libraries, which not only requires AI , big data and other technologies, as well as the analysis of the expert team, require the team to be immersed in the industry and accumulate labels for many years.

For virtual assets and the Web3 industry, the core of compliance and anti-money laundering efforts is to establish reliable; KYC (Know Your Customer) and; KYT (Know Your Transaction) procedures, more precisely; KYA (Know Your Address) and; KYT. This can not only help virtual asset trading platforms or other virtual asset service providers verify the identity and background information of customers, but also help them monitor trading activities to identify and prevent suspicious transactions and capital flows. KYT; and; KYA; is not a "one-off deal", but a matter of continuous monitoring during the customer transaction cycle. From the perspective of efficiency, compliance technology will greatly simplify the process and improve efficiency in this cycle. "Especially for small banks, they can use compliance technology technology solutions to achieve very beneficial results without incurring high costs or having to recruit a large number of data scientists." Zhu Liqiao, executive director of the Hong Kong Monetary Authority; 2022 ; at the 2010 Asian Fraud and Financial Crime Conference.

Zhang Chao, as a guest speaker on the theme of compliance technology at the GEF forum, mentioned in his keynote speech that OKLink's latest "Onchain AML" technology solution is at the right time, and it is also "already established". Prepare", the newly created three major product lines overlook the Web3 industry from a regulatory perspective, which can help the compliance and sustainable development of the virtual asset industry in an all-round way.

The other side of compliance technology

With the continuous development of technological means, financial crimes will become more and more complex, and the demand for compliance technology will also increase. OKLink; OKLink; compliance business and combating financial crime business have already launched operations, and relying on the parent company OKLink Group to focus on the research and application of blockchain technology in a marathon state, knowing that compliance is the key The key to driving real growth in the industry. In this answer sheet submitted to Hong Kong Web3, Okey Cloud Chain has proved to the market the other side that compliance technology can reach with practical actions and mature products. For companies or projects in new industries, compliance is not only a harmonious symbiosis of legal compliance and commercial profitability, but also one of the important criteria for partners or counterparties to evaluate each other's business reputation. It is reflected in the financial statements of each enterprise, and it is also the embodiment of the value of enterprise assets; then for the industry, compliance technology can also improve the production efficiency of the industry through automation and other technical means, and assist the relevant departments of the regulatory agency to manage the automatically generated Report and detect risks for early warning.

Not only the Web3 industry, but also the financial technology industry, the wave of human technological innovation will come to us at a faster speed with unknown risks, and compliance technology will build the first dam for every company in the industry. In the spirit of openness and sharing, discuss with the industry and regulatory agencies the regulatory framework and compliance regulations that are conducive to industrial development, and develop and implement compliance technology products based on solid technology and rich data. This is the way for traditional financial institutions to open the Web3 market. The key to the door.