Hong Kong blockchain initiatives natural development for financial hub, says Signum Digital CEO
Following the global crypto failures and bankruptcies of 2022 and China’s known distaste for cryptocurrencies, Hong Kong regulators surprised with a series of initiatives late last year to attract digital asset investors and platforms to the city in a bid to become Asia’s financial hub for emerging asset classes.
As crypto exchanges in the US and other regions are in dispute with regulators over how to classify digital assets, Hong Kong’s plans to license crypto platforms should bring some clarity to the Asia region, Samson Lee, CEO of asset tokenization platform Signum Digital, said in an interview.
“As long as there is a clear set of rules, people know the rules of the game and then they will deduce the best strategy,” Lee said.
His Hong Kong-based company last week received in-principle approval to operate a brokerage platform in the city for securitized tokens, or digitalized tokens on the blockchain that can be linked to stocks, real estate and other real-world assets.
Hong Kong’s plans include a licensing regime for crypto trading platforms due to go live in June this year, and another for stablecoin issuers expected to be released later in 2023. The city created a digital asset industry task force under Finance Secretary Paul Chan and began dripping a fund of USD 6 million to local blockchain startups.
Although a small start, the initiatives are attracting companies and investment with crypto market data provider Kaiko, cryptocurrency exchanges Huobi Global and Gate.io all announcing plans to set up headquarters in the city.
They also match larger developments among heavy-hitters in China after President Xi Jinping said in January that new technologies such as blockchain are key to building a digital economy.
E-commerce giant Alibaba is launching software tools for businesses in the city involved in the next-generation Internet, or a so-called Web3 based on decentralized blockchains. China’s leading smartphone maker Huawei Technologies has partnered with Polygon blockchain to form a Web3 metaverse alliance, while $428 billion game developer Tencent has teamed up with Avalanche blockchain.
Talent attraction
“Hong Kong has a very good chance to bring in a lot of talent – I think specifically, we’ve always had quite a few kinds of Chinese diaspora that are in the crypto community,” Hong Kong-based blockchain company Animoca Brands’ chief business officer Alan Lau said during a panel discussion at the FOMO Asia Web3 conference on Thursday.
“A lot more people have come to us and asked, is Hong Kong [crypto] will the regime remain? And we certainly feel that this is not a yo-yo type of regulatory policy, Lau said.
The Signum chief said another example of Hong Kong’s blockchain future is experimentation with digital finance, citing the example of a US$100 million tokenized green bond issuance last month using blockchain.
“It’s not a lot of money if you’re talking about bonds … but the Hong Kong government is talking,” Lee said, adding that despite the small amount, Hong Kong brought in banking heavyweights Goldman Sachs and HSBC to help with sales.
Signum said securitized token offerings, or STOs, improve fundraising opportunities in Hong Kong, a city filled with small to medium-sized businesses and family offices, and give investors direct access to fully compliant investment options.
Although cryptocurrencies attract most of the blockchain spotlight, STOs are the development that Hong Kong financiers need to connect digital assets to non-crypto natives, Lee said.
“Evolution is a better term than revolution or disruption because I see this as a natural transformation from traditional finance,” Lee said.
“Because security tokens created as a regulated product are already fully compliant, they have all the flexibility to structure an underlying asset, it could be real estate, it could be equity in a company, it could be debt, it could simply be a pure income stream of a project.”
It’s clear that Hong Kong authorities see opportunities in a digital asset economy, and that blockchain is an “unstoppable” next step, Lee said.
Hong Kong regulators always start from a stricter standard and then begin to loosen as they feel more comfortable. He said. “They find a balance.”
