The synchronization of government legislation with market expectations, the expansion of product ranges, the promotion of industry innovation, and the forward-looking outlook of custodial services are collectively shaping the future of Web 3.0.

Article Author: Echo, MetaEra

Source: MetaEra

Recently, MetaEra's Hong Kong section has launched a significant initiative, leading the "Two-Year Anniversary Celebration of Hong Kong's New Crypto Policy" series of events, one of which is the "High-End Dialogue: Influential Leaders in Hong Kong Web 3.0." The featured interviewee this time is Hong Kong Legislative Council member, Kenneth Leung.

Profile

Kenneth Leung, Hong Kong Legislative Council member, President of the Hong Kong Information Technology Federation, and investor in Hong Kong tech enterprises. Mr. Leung has a strong background and rich experience in both technology and finance, dedicated to promoting the development of Web 3.0 and fintech, and representing the tech innovation sector in the Legislative Council of the Hong Kong Special Administrative Region, contributing to the development of this field.

Key Insights

· The government has been responding to the emerging field of Web 3.0 at an unprecedented speed historically. The challenge we face is how to bridge the gap between the speed of government legislation and market expectations.

· First, we hope the government will expedite the processing of remaining licensing applications so that virtual asset trading platforms can obtain legal operating qualifications as soon as possible. Second, we need to explore expanding the range of products that trading platforms can offer. These are all important matters that require follow-up and promotion.

· The government's guiding direction is to develop more use cases for stablecoins through different scenarios. We look forward to intelligent individuals submitting applications and hope the industry can propose various creative ideas.

· Legislation for virtual asset custodial services is expected to be submitted to the Legislative Council for discussion and approval next year, which is an extremely important step for the overall development of Web 3.0 in Hong Kong.

Full Interview

MetaEra: As we celebrate the two-year anniversary of Hong Kong's new Web 3.0 policy, what aspects of progress have left a deep impression on you?

Kenneth Leung: My impression is that the government has been responding to this emerging field at a remarkably fast pace, which is unprecedented in history. However, there may still be a certain gap compared to the expectations of market practitioners. These practitioners, especially innovators in the tech field, are accustomed to freely exploring and promoting the development of new products and directions, and are not used to being overly constrained by rules. This has been the case since the emergence of blockchain. In terms of legislation, the government's pace over the past two years has been quite rapid, including advancements in exchanges, stablecoins, virtual asset over-the-counter trading (VAOTC), and custodial services. If we look back at the history of the Hong Kong government, we can see that the current legislative process is already very efficient. However, to achieve good interaction between the government and the market, both sides need to move towards each other.

Market practitioners may not have fully considered the complexity and experience of government legislation, which is understandable. In the Web 3.0 field, Hong Kong needs to draw more on financial regulatory methods and legal provisions to enhance industry trust. For many industry practitioners, legislation may be a completely new area, and they need time to adapt to this objectively slow pace. The challenge we face is how to bridge the gap between the speed of government legislation and market expectations.

I have also been working hard to promote communication and understanding between both sides. For example, I tell the government that the Web 3.0 industry needs more inclusiveness and a faster legislative process; at the same time, I also inform industry practitioners that the legislative speed in Hong Kong is already relatively fast. In any mature economy or society, the normal legislative process takes a considerable amount of time. To balance this gap, we are also trying to gradually bring the government and the market closer together through pilot projects and regulatory sandboxes.

MetaEra: You primarily focus on the development of the tech sector. As a Legislative Council member of the Hong Kong SAR, how have you promoted the government's move towards the new Web 3.0 policy, and what memorable experiences do you have? Can you share some of these stories with us?

Kenneth Leung: Regarding memorable experiences, I want to emphasize the recognition of the future market scale of technology and the consensus formation among various government departments in this process. To reach a consensus, first, the market needs the government to recognize, support, and welcome the development of the Web 3.0 industry from an administrative and declarative standpoint, acknowledging that the Web 3.0 industry is the direction of future development, with long-term potential and a huge market scale, and that Hong Kong has the corresponding conditions and capabilities to promote the development of this industry.

The formation of this consensus is not easy, but during the promotion process, it has actually been relatively smooth. This is thanks to early discussions with the Financial Secretary. About two years ago, when we were discussing this industry, the Secretary quickly recognized the development prospects of the Web 3.0 industry and promptly expressed support, also pushing for the implementation of related policies from the top down. This also accelerated the issuance of government declarations, which clearly recognized the market potential of the Web 3.0 industry. This process was actually very short. I personally found this impressive.

MetaEra: After the implementation of Hong Kong's new policy, what changes have occurred in the regulatory framework for virtual asset trading platforms, and what challenges and opportunities do these changes bring to platform operations?

Kenneth Leung: The main focus is on the development of Hong Kong's virtual asset trading platform licensing system over the past two years. Since the implementation of the licensing system, we have witnessed several trading platforms obtaining formal licenses. I also hope that the Securities and Futures Commission will expedite the processing of other applications on the current list, allowing more trading platforms to operate legally in Hong Kong. Once more platforms are compliant, the next step is to further enrich the variety of products offered by trading platforms. Since June last year, the products that licensed trading platforms in Hong Kong can trade have expanded from Bitcoin and Ethereum to more virtual currencies, and earlier this year, Bitcoin and Ethereum ETF products were also launched.

To attract more investors to participate, we need to ensure that the products offered by exchanges are more diverse. Therefore, the next development includes two key points:

First, we hope the government will expedite the processing of remaining licensing applications so that trading platforms can obtain legal operating qualifications as soon as possible. Second, we need to explore expanding the range of products that trading platforms can trade, not only hoping for exchanges to trade virtual currencies but also looking forward to seeing more tokenized products, including the much-discussed utility tokens and real-world asset tokenization. These are all important matters that we urgently need to follow up and promote.

MetaEra: What role do you think Hong Kong plays in international cooperation in the Web 3.0 field?

Kenneth Leung: Web 3.0 itself is an international market. The Web 3.0 products launched by the industry in Hong Kong cannot be limited to the local market, as the local market is limited in scale and cannot support the sustainable development of businesses. We must think about how to push Hong Kong's products to the international stage to meet global market demands. Therefore, the licensing mechanism for trading platforms mentioned earlier, how to promote more innovative digital asset products for trading in Hong Kong, and how to facilitate the buying and selling of these investment products by people from other places through Hong Kong are all directions we will follow up on.

MetaEra: What positive impacts does the stablecoin sandbox launched by the Hong Kong Monetary Authority have on innovation in the Web 3.0 field? How do you evaluate the application and potential of the sandbox mechanism in regulatory practice?

Kenneth Leung: Stablecoins are very important, and as we all know, they have developed rapidly in recent years. The issuance of the two major stablecoins has exceeded $100 billion, with huge daily trading volumes. We see that their use cases are very broad, especially in international education and trade. This is actually very suitable for Hong Kong to manage and promote. Because Hong Kong has a natural advantage in international trade and investment payments, the use of stablecoins can save time, reduce costs, and increase transparency. Therefore, Hong Kong is fully capable of developing stablecoins as an important product. I feel that stablecoins are still in the early stages, and there is huge room for development, serving as a crucial bridge between fiat currency and digital assets. The development of stablecoins will help promote the growth of other digital assets in Hong Kong, because if stablecoins do not develop well, other digital assets will also struggle to grow; it is a key interface.

In promoting stablecoins, Hong Kong needs to achieve balance in several aspects. First, safety is the most important; stablecoins have historically encountered some issues, such as algorithm problems or the stability of underlying assets. Hong Kong has the capability to provide a safe environment for stablecoins. In addition to safety, usability and innovation are also crucial, which requires the industry to think about how to issue and use stablecoins in Hong Kong. The government's guiding direction is to develop more use cases for stablecoins through different scenarios. We look forward to intelligent individuals submitting applications and hope the industry can propose various creative ideas to better leverage the potential of stablecoins in future finance through Hong Kong's licensing mechanism. We believe that the innovative thinking of the industry will open new paths for the development of stablecoins, making them stronger through Hong Kong. This is not only the government's responsibility but also relies more on the industry's thinking and actions.

MetaEra: Regarding virtual asset custodial service providers, the Hong Kong government plans to introduce a regulatory framework. How do you think this will enhance Hong Kong's competitiveness in providing virtual asset custodial services?

Kenneth Leung: I am very pleased to see the development of custodial services. Initially, the government did not fully consider the custodial mechanism when promoting Web 3.0. However, with the emergence of issues such as the FTX incident, society has realized the need to better isolate and protect customer assets. Hong Kong must establish a legal framework for virtual asset custodial services. I have personally participated in this process; over the past year, I have organized multiple discussions on custodial services and promoted the custodial topic with various government departments. Therefore, seeing the Chief Executive propose the idea of legislation for virtual asset custodial services in the policy address excites me greatly. This is significant for me because after more than a year of effort, we finally have progress, and it is expected to be submitted to the Legislative Council for discussion and approval next year, which is an extremely important step for the overall development of Web 3.0 in Hong Kong.

MetaEra: The Hong Kong government has provided a series of funding support and incentive measures for Web 3.0 startups. Can you specify these measures and how they help startups establish and develop in Hong Kong?

Kenneth Leung: When we first saw the potential of startups in the Web 3.0 field, the government entrusted the Digital Port with the relevant business and allocated HKD 50 million to promote the establishment and development of Web 3.0 startups in Hong Kong. Subsequently, we saw a rapid increase in demand, and the Digital Port has attracted hundreds of Web 3.0 companies in a short period. Given the enormous market demand, I believe that this HKD 50 million may not be sufficient to meet the needs, and I will continue to push the government to provide more support for Web 3.0 startups. Tech startups are key drivers of innovative development; they bring new ideas, inventions, and innovations. Especially in the development of technology, it is these startups that provide vitality. Hong Kong has experts in the financial sector, but it also needs talents in the tech field; the combination of both can foster new ideas and new momentum. Therefore, I believe there is still room for greater policy support for Web 3.0 startups. The government mentioned in the policy address that it will provide funding for startup accelerators, with each accelerator eligible for up to HKD 30 million. I hope that at least one or two of these accelerators will focus on Web 3.0 technology to better promote the development of Web 3.0 startups in Hong Kong.

MetaEra: The development of Web 3.0 technology poses challenges and opportunities for the traditional financial industry. How do you evaluate the progress and strategies taken by traditional financial institutions in Hong Kong to adapt to these changes?

Kenneth Leung: In my view, the opportunities in the Web 3.0 field far outweigh the challenges. After this period of development, many traditional financial institutions have also seen the opportunities within. There is a general consensus: first, this is an opportunity; second, regardless of personal opinions, Hong Kong must move towards the direction of digitalization and blockchain technology development. Financial institutions are also actively exploring how to play a role in Web 3.0. Although the current economic situation has caused some steps to slow down or be more cautious in terms of costs, large financial institutions in Hong Kong are undoubtedly researching how to participate in and promote the development of Web 3.0. I hope that in the future, there will be more motivation to encourage them to participate more actively. For example, the Project Ensemble launched by the Monetary Authority is a great driving force that can promote collaboration between traditional financial institutions and Web 3.0 teams to jointly develop new tokenized financial products.

MetaEra: For enterprises and individuals looking to enter the Web 3.0 field, what specific advice or guidance do you have?

Kenneth Leung: For individuals, many people are very interested in this industry. For those who are already involved, I believe they need to have a deeper understanding of technology and build a solid foundation in technology, which is essential. Many financial professionals in Hong Kong are participating in the development of Web 3.0, but they often approach it from a financial perspective. I hope that friends in the financial sector can strengthen their understanding of the technological foundation so that they can better grasp the development trajectory of Web 3.0. At the same time, those in the tech field should also have a deeper understanding of finance, as Web 3.0 is essentially a combination of fintech, and professionalism is something we must possess. Society should not only pursue quick profit methods but should ensure that both technology and financial foundations are solid, so as to create excellent products. Hong Kong provides a lot of support in terms of technology and financial knowledge, including professional talents and courses, and the government also has relevant subsidies. Everyone should first build a solid foundation and then consider whether to start a business or join a corporate team.

For enterprises, it is also very important to understand Hong Kong's advantages and how they benefit company development. I often say that the location of entrepreneurship is very important; its assistance to entrepreneurship should not be overlooked. Fintech, Web 3.0, and digital assets have great development prospects in Hong Kong, but each company's situation is different, and they need to consider how to leverage Hong Kong's advantages. I have also noticed that some teams do not have a deep understanding of Hong Kong's regulatory and licensing systems. I suggest that these teams and talents come to Hong Kong for visits; I welcome them at any time and am willing to share the existing policies and regulations in Hong Kong. Everyone must consider how to utilize Hong Kong's advantages to promote their own growth.