Promote the healthy development of Web3 and help Hong Kong integrate into the trend of innovation and technology

Author: Member of the Legislative Council Qiu Dagen

The SAR government has vigorously supported the development of the Web3 ecosystem in recent years, and Cyberport has established a Web3 base earlier this year. This year's budget also announced the allocation of 50 million yuan to promote the development of the Web3 ecosystem, including promoting cross-sector business cooperation and holding large-scale international seminars. In order to learn and grasp the cutting-edge development and industry trends of Web3, the author has communicated with hundreds of innovation and technology teams in the past year. It can be said with certainty that Web3 is still in its infancy and has great prospects.

At present, some Web3 application solutions are highly anticipated, but for them to become popular among the public on a large scale, three factors are indispensable: first, the underlying technology still needs time to develop and become more mature; second, the public understands the applications of Web3 scenarios, and adapt to the various changes that new technologies bring to society and life; third, policies and laws must keep up with each other to support the orderly and compliant development of Web3.

Hong Kong’s improved data circulation supervision is conducive to development

Hong Kong definitely has the potential to develop into a global Web3 hub. First of all, the backbone of Web3 is distributed ledger technology (DLT), which fundamentally changes the way many data (personal information, transaction and asset data, etc.) are generated and stored. Therefore, the degree of freedom and sound system of a region have a great impact on Cultivating the Web3 ecosystem is crucial. Under "one country, two systems", Hong Kong enjoys a high degree of autonomy, and the quality of its legal and judicial systems is recognized by the international community. As a competitive international financial center, Hong Kong’s financial regulatory system has reached an international level and it also enjoys robust legal protection in terms of free flow of data and privacy, making Hong Kong an ideal place to develop Web3 business.

Secondly, the Chinese are a new force in today’s technological trend, and are particularly outstanding in the development of underlying technologies. Although they are scattered all over the world, once a large Web3-related company enters Hong Kong, it may cause a crowd effect, attracting this group of talents to come to Hong Kong for development, and making Hong Kong enjoy the bonus of core technical personnel.

Finally, with the "Policy Declaration on the Development of Virtual Assets in Hong Kong" released at the end of 2022, and the licensing system for virtual asset trading platforms (VATP) implemented by the Securities Regulatory Commission on June 1 this year (with a one-year grace period), Many Web3 operators look forward to the introduction of more policies suitable for virtual assets and tokenization, encouraging them to invest in financial innovation, launch Web3-related products to test market reactions, or gain practical experience in different application scenarios through sandboxes.

This is a critical moment for the development of Web3 in Hong Kong. In addition to being stable and orderly, we must also encourage technological innovation, so as to attract elites from all walks of life. However, in recent months, some unscrupulous elements have taken advantage of the SAR government's promotion of the development of Web3 to come to Hong Kong to carry out illegal activities, such as using pyramid schemes to promote some "air coins" for fraud. Others operate illegal platforms to raise funds. These operators eventually absconded or went bankrupt, bringing a stigma to Hong Kong and greatly damaging the momentum of healthy development of Web3. Therefore, regulatory agencies and law enforcement agencies should pay close attention to prevent criminals from using the name of Web3 to make money in Hong Kong.

To make the public have a correct concept of Web3

Specifically, the Securities and Futures Commission should disclose operators that have no intention of applying for licenses or are not licensed as soon as possible so that the public can avoid transactions with "doomsday" platforms. The SAR government should also be wary of retail investors who publish exaggerated and misleading advertising content on some platforms. In addition, many citizens do not have a deep understanding of the various applications of Web3 and the importance of Web3 to personal life and finance. They one-sidedly believe that Web3 is just speculating on cryptocurrency. Prejudice and lack of relevant knowledge will increase the chances of citizens being deceived and make it difficult to popularize legitimate Web3 products. The government should strengthen public education and take the lead in launching reliable Web3 application solutions and scenarios so that citizens can become familiar with them in daily life. In the long run, it should regulate Web3 products through legislation so that citizens can use or purchase Web3 in a transparent, compliant, and safe manner. Products, this is a reasonable guarantee.

Recently Norman Chan, the former president of the Hong Kong Monetary Authority, mentioned that the name "virtual asset" (virtual asset) is easily misunderstood by the public, thinking that it is equivalent to cryptocurrency, so it should be called "digital asset". The author fully agrees. The connotation of "digital assets" is broader and deeper than pure virtual assets or cryptocurrencies. It represents that in the new era of Web3, all kinds of tangible and traditional assets, goods, services and rights can be tokenized. With the help of DLT technology and smart Contracts create many unprecedented application scenarios. I hope that Hong Kong will usher in the day when Web3 matures and play an important role in this technological trend.