Opportunities and Challenges for Hong Kong to Become a Global Web3 Center

Recently, the Hong Kong Monetary Authority released a document regarding the regulation of activities related to stablecoins, which aligns with Hong Kong's strategy of connecting the new generation of digital assets with its mature traditional financial ecosystem. This initiative highlights Hong Kong's steady progress in establishing a clear and comprehensive regulatory framework.

However, merely having a sound regulatory framework is not enough for Hong Kong to stand out in the global competition for Web3 centers. To truly become a leader, Hong Kong also needs to take the lead in the technological infrastructure that supports the creation and trading of digital assets, in order to attract the best talents in the industry.

Hong Kong was once the birthplace of many well-known cryptocurrency exchanges and still has the most Bitcoin ATMs in Asia. However, since 2019, due to the pandemic and cautious policies, Hong Kong's position in the global cryptocurrency industry has declined. Nevertheless, missing out on the ups and downs of the cryptocurrency industry may not be a bad thing, as Hong Kong now has the opportunity to redefine the direction of Web3 center development.

As the Chinese government begins to view blockchain and digital assets as a potential source of economic growth, Hong Kong has received support to explore paths of innovation and global integration. At the same time, following the collapse of several large cryptocurrency platforms, Europe and America are tightening regulations, which may prompt more activities related to digital assets to shift towards the East, creating opportunities for Hong Kong to regain influence.

As one of the world's top capital markets, Hong Kong has a comprehensive financial regulatory framework and excellent fintech talent. This makes it an ideal place for developing real-world blockchain applications, especially in the area of asset tokenization. The Hong Kong government is committed to creating a favorable environment for public-private partnerships, and when government agencies, financial institutions, tech giants, and native cryptocurrency builders collaborate, digital assets are expected to better integrate into the real economy.

In addition, Hong Kong can leverage the technology startup resources of mainland China. Many Chinese internet giants listed in Hong Kong have begun to venture into the digital asset and Web3 space, and Hong Kong may become an ideal breeding ground for their development.

However, Hong Kong also faces challenges in becoming a Web3 hub. The existing regulatory framework may not fully apply to the rapidly evolving digital assets and cutting-edge technologies. Hong Kong's principle of "same business, same risks, same rules" may limit innovation, especially grassroots innovation.

Another challenge is that Hong Kong needs to develop differentiated digital asset technology infrastructure. The security of digital assets is different from traditional assets and requires advanced technologies such as multi-party computation to ensure that asset owners have complete control or co-management rights over their assets.

Looking to the future, Hong Kong needs to focus on developing Web3 infrastructure related to institutional business. To reduce the risks of centralized platforms, a large amount of digital assets may be transferred to custody platforms that adopt the latest technological solutions. Institutions also need solutions that enable distributed private key management and fund isolation to comply with new regulatory requirements.

In summary, Hong Kong is in a favorable position to draw lessons from the cryptocurrency industry over the past few years and establish a Web3 center with an appropriate regulatory environment and technological infrastructure, effectively managing risks while promoting innovation.