Editor | Wu Talks Blockchain
This article is an exclusive interview by Colin Wu with Hong Kong Legislative Council member Chiu Duncan, who elaborated on his understanding and promotion logic of Web3 and the Cryptos industry, and reviewed his personal journey from Technology venture capital to supporting blockchain development. He emphasizes the importance of blockchain technology and explains the evolution of Hong Kong from a ‘tolerant experiment’ to establishing clear regulatory policies, believing that a robust regulatory strategy helps enhance market confidence and avoids short-term speculation that could damage Hong Kong’s financial brand. At the same time, Chiu also talks about Hong Kong’s comparative advantages over regions like Singapore and Japan, suggesting that Hong Kong should focus on the international market and build an innovation center for financial products. He points out that stablecoins, compliant Exchanges, and on-chain financial infrastructure are key to Hong Kong’s next stage of development, and emphasizes that Hong Kong should maintain openness in its international positioning, playing a complementary role with the mainland rather than competing. Finally, he emphasizes that Hong Kong promotes Web3 not out of short-term economic considerations, but to support the sustainable development of the industry from an institutional foundation.
A review of the personal journey from venture capital to participating in legislation, the earliest encounter with Cryptos.
Colin: Today we have invited Hong Kong Legislative Council member Chiu Duncan, who is one of the strongest supporters of Web3 in Hong Kong and has expressed many related views. Recently, the overall support for Web3 in Hong Kong has surged, as has the public opinion atmosphere. Today, we have some questions to ask Chiu to discuss the current situation in Hong Kong and how it should develop in the future.
First of all, please introduce yourself, and when did you first encounter Cryptos? When did you buy Bitcoin for the first time?
Chiu Duncan: I am a member of the seventh Hong Kong Legislative Council, representing the Technology and Innovation sector. Before entering the Legislative Council, I was engaged in Technology venture capital. For over twenty years, I have been involved in investment through my family’s business and later established Funds. In 2021, I began participating in the Legislative Council as a seventh-term member.
If I recall my first encounter with Cryptos, it was around 2014 or 2015. At that time, we often traveled to the United States for fundraising, which had started exploring this field relatively early. At that time, blockchain technology was just emerging, and Ethereum and Bitcoin were also just beginning to gain attention. Around 2015 or 2016, there was also a period of ICO frenzy, with many different token projects being launched in the US.
However, since we were running a relatively traditional Technology fund, despite our venture capital background, we were still relatively conservative, so we did not participate much in these token projects.
Personally, I may have tried simple buying and selling of Bitcoin at that stage, mainly to experience the operation process. It cannot be said that there was deep participation in the crypto circle; it was just a state of observation and attention, watching how this field gradually developed.
The conservative attitude toward Cryptos and focus on technology in the early days.
Colin: Over the years, when you first came into contact or started observing Cryptos and blockchain, what were your thoughts or reflections? Did you have a relatively positive attitude from the beginning, or did you feel that the industry was quite chaotic and had some issues?
Chiu Duncan: To be honest, at the very beginning, we certainly needed to understand it, including some early founding teams, etc. We would investigate. As venture capitalists, we need to understand the logic behind every project. However, when we first got into it, that period was quite crazy, with ICO projects continuously emerging and various tokens being issued; Crypto projects were appearing one after another.
So as a traditional venture capital fund, we generally tended to be conservative. I personally did not engage much in that ICO wave. We believed that if it was at the technical level, such as the underlying technology of blockchain, we would consider investing, but for participation on a currency basis, we engaged very little.
It can be said that my attitude at that stage was relatively conservative.
Colin: From 2017 until now, you have experienced about seven to eight years. Has your thinking undergone some changes? Because I see you now have many positive views on Hong Kong’s cryptocurrency policy in the public opinion and media, hoping to promote related developments.
Chiu Duncan: First of all, I want to say that we always believed that blockchain is a very important technology. About ten years ago, we were already paying attention to blockchain technology and invested in some companies providing blockchain solutions. Therefore, we highly value this technology itself, much like today’s artificial intelligence. Back then, we were very focused on the overall development of blockchain.
However, when it comes to the level of ‘issuing coins’, my view is that there was a lack of norms and rules at that time, and widespread consensus had not been formed. You could randomly write a white paper and start issuing coins, and I personally disagree with such practices, which is why I did not participate in the ICO boom at that time. Of course, there were some people who made money and others who lost money. But in my opinion, if liquidity could be created just based on a white paper, I have reservations about this approach, and I still do.
With the development of blockchain, a large number of new products have emerged. These products are not only used by a few, but are driven by a large-scale Community. Because of this, more and more people now believe that compliance is a feasible direction. A consensus is gradually forming, including the conditions for product issuance, infrastructure, etc.
Therefore, I believe this is the reason for our change in attitude. The reason many Assets in this world have value is that humans assign value to them. Now, more and more people are participating in the trading of these new asset classes, and the market’s consensus is gradually being established.
In the future, there will definitely be more and more standardized management mechanisms; issues such as how products are issued, how they are traded, and how they are regulated will all need to be addressed. This direction is irreversible and will only grow larger. Therefore, we must think about how to participate and how to promote.
Moreover, this is not just a matter for Hong Kong; it is a global consensus. Many countries and regions are also promoting the development of this field. Thus, we are not trying to seize an opportunity, but hope that Hong Kong can inject new vitality into this industry.
For this industry to enter the mainstream, it must rely on support from places like Hong Kong that have a legal foundation, financial foundation, professional talent, and regulatory standards. Otherwise, it will forever be just a product within the Community and cannot truly reach the mass market.
Therefore, I believe this is mutually beneficial. It is not that Hong Kong wants to take a share of the pie because it sees the potential of Web3, but rather that through our systems and legal foundations, we are raising the entire industry to a new level.
The historical evolution of Hong Kong’s regulatory path and policy considerations.
Colin: Next, I would like to ask you to discuss Hong Kong’s positioning in the crypto field. In fact, there isn’t a good understanding outside of Hong Kong regarding the evolution of its regulatory policies. Traditionally, it seems that Hong Kong was initially in a state of relatively “hands-off” governance. Many international companies started in Hong Kong; for example, Tether was one of the earliest, and the now-popular FTX was also initially based in Hong Kong. Why has Hong Kong transitioned from initially allowing development to gradually enacting clearer regulatory laws? What are the legislative and regulatory considerations in between? Can you give us an introduction?
Chiu Duncan: Actually, I do not represent the Hong Kong government, but I can share my views. I don’t find this change strange because Hong Kong has always been a very inclusive place. Many of our laws are basically open to attempts as long as there is no explicit prohibition. The past approach to the technology industry has been similar; it encourages diversity and allows everyone to try different inventions and develop new products.
So our consistent practice is to allow those willing to innovate to try freely. However, once development reaches a certain stage where some matters may require clearer management, we will start to discuss legislation and government intervention.
Similarly, it cannot be said that Hong Kong was initially completely “hands-off” governance; a more accurate description is that we allowed the industry to develop naturally. However, when problems began to emerge in the industry, we must reflect: will these problems occur again? Will they affect the citizens and social stability? Furthermore, does this industry have a sustainable technological foundation?
I believe we have come to a consensus that this industry will not disappear but will continue to develop and even attract more participants. Therefore, it is necessary to think about how to manage it and establish clearer rules and development paths for it. This was the main reason for the introduction of the regulatory policy.
Moreover, as I mentioned earlier, Hong Kong actually has the capacity to positively promote this industry. As early as 2022, Hong Kong released its first official statement regarding the development of virtual assets, which drew significant attention. The significance of this statement lies in its clear expression of Hong Kong’s position: since this industry will continue to exist, as an international financial center, Hong Kong has both the ability and the responsibility to help it develop better.
From then until now, over the past two years, we can clearly see that Hong Kong is moving in the right direction. From a legal perspective, the government has provided many entrepreneurs and practitioners with clear guidance. The entire industry has gradually evolved from a completely Crypto Native community to develop more intersections and integrations with traditional financial institutions.
Looking ahead, I still maintain this view: whether it is new crypto products or traditional financial products, as long as they are financial products, they will ultimately be on-chain. This means that they will all be traded, recorded, and protected on the blockchain, forming a brand new financial infrastructure.
The term ‘Web3’ began to be widely used in 2022, and I think it is very appropriate. This is because it is not limited to Cryptos, but includes a broader policy vision. Many countries still view this industry solely from the perspective of crypto payments, while Hong Kong has chosen to define this sector with Web3, reflecting our openness and systematic thinking in policies.
This is not only about promoting the buying and selling of Cryptos, but it is a grander goal of reforming the entire financial market through blockchain, which is very suitable for Hong Kong to take on the role of promotion.
Questions regarding the ‘overly tight’ policy and reasons for steady development.
Colin: In the past two years, Hong Kong has introduced many policies, and the overall atmosphere is quite good. However, there is a discussion in society that, although the government at various levels has shown a very welcoming attitude towards Web3 companies, the actual policy implementation seems to be slow or overly tight. Especially compared to some other regions, some feel that Hong Kong’s policies are too strict. How do you view this phenomenon? How should the positive aspects and the complaints be balanced?
Chiu Duncan: I think this issue is very important. Complaints will definitely arise; we cannot meet everyone’s expectations. But I have always maintained that to walk steadily is to be able to walk far. This is also our basic position. It is not the case that the faster you go, the better the market will develop.
I personally believe that our current pace is ‘seeking progress while maintaining stability.’ Our development direction can support a long-term plan for ten or fifteen years. If we suddenly open everything up and allow everyone to freely launch various products here, it could lead to some chaos and even negative cases.
Of course, practitioners are indeed facing many development opportunities now and are very proactive, but many different regions around the world offer various choices. The question is whether Hong Kong should compete for these development opportunities. We must be clear about our role as an international financial market.
Hong Kong’s current financial system, with so many financial products and such high stock market valuation and trading volume, exists because everyone has confidence in Hong Kong. The primary condition for doing investment markets is that investors have confidence in you and are willing to entrust their money to you. To ensure that this industry is sustainable in the long term and becomes a new financial structure, steady progress must be made.
If you recklessly let go, allowing the market to be crazily speculated and harvested for three to five years, the final result may be that the entire market collapses, which would not only be detrimental to Hong Kong but could also implicate the traditional financial system, causing severe impact on Hong Kong’s financial brand.
Therefore, internal review and coordination work must be done well. For example, for certain products that have been operating in other markets for many years, are relatively mature, and are linked to finance, it would be unreasonable if Hong Kong does not seriously consider whether to open up.
On the other hand, from the perspective of long-term development of Web3, we also have a responsibility to ensure that Hong Kong is stable. Policies cannot have no red lines; anything cannot be done. After all, there are too many smart people in this market, many capable of quickly arbitraging, and without regulation, it might gain external praise in one or two years, but three to five years later, the entire ecology could collapse, which is not the situation we hope to see.
Since Hong Kong has decided to develop this industry, there is personal support for the government adopting a direction focused on ‘stability’. Of course, as you mentioned, will stability turn into being too slow and too conservative? This requires us to regularly review market feedback.
I believe the current regulatory bodies actually respond quickly; for example, when AETF products were discussed at the beginning of last year, they quickly understood and approved multiple projects within three months. As long as it is a product they are familiar with and understand, the approval speed is very quick.
Of course, some innovative products that Hong Kong has not done in the past may experience slower approvals. But we are continuously trying, and I hope more and more new products can land in Hong Kong, but potential risk factors must also be considered.
The difficulty of the profit problem of compliant exchanges in Hong Kong and their international positioning.
Colin: Regarding Hong Kong’s position in the entire crypto market, we feel that Hong Kong is quite similar to Singapore, unlike the United States or South Korea, which have a large domestic market. Compliant exchanges in the United States and South Korea can maintain operations and achieve considerable profits solely relying on the domestic market. However, some reports indicate that compliant exchanges in Hong Kong are almost not profitable under the current regulatory framework, and even face long-term losses. What do you think about this situation? If compliant institutions are always losing money, how can this regulatory model be sustained?
Chiu Duncan: This Industry must go through an investment process. Our investment in any Industry aims for long-term development, and we also hope to provide more opportunities at the product end to strengthen the market.
Currently, only two or three Exchanges have really started Operations, although Hong Kong has already issued 10 or 11 licenses. I often go to Japan, where they have issued over forty licenses, but only a few are truly profitable. Looking at the United States, there were many different types of Exchanges in the early days, including onshore, offshore, and unlicensed, which were also not profitable at that time. It was not until later reforms that some large Exchanges began to show good profitability.
So, this is essentially a competitive process. Hong Kong has just opened up, and such early losses can be expected. Moreover, our products differ from those in other regions, and everyone is still exploring how to categorize and position them.
Taking Japan as an example, they currently have over 30 Exchanges left, but most only provide token trading, mainly targeting the retail market. My expectation for Hong Kong is not just to trade existing products but also to hope that local Exchanges can launch some new, yet-to-be-released products in the future. I believe this should become one of the new income sources for Exchanges.
We need to think about how to develop new Businesses and explore new ‘red ocean’ markets, rather than getting caught up in internal competition within the old market framework. Hong Kong’s positioning is as an international market; no one comes here for the local business of a 7 million population. We need to consider how to push local products to a larger external market.
I think this is what we must do quickly next — how to promote Hong Kong’s Exchanges and products to the global market. Everyone should be able to launch products in Hong Kong, with the audience being global, not just local.
Although Singapore moved ahead of us, I do not consider it conservative. Its direction is different from Hong Kong; from the beginning, it imposed many restrictions on the retail end, but was open to the institutional market. Their government also supports many projects.
So I believe Hong Kong can also interact more with Singapore and learn from each other. Ultimately, everyone’s goal is to expand the entire pie and open up broader international markets, rather than being limited to local population businesses.
Views on the issue of too few tokens available for retail trading.
Colin: Japan’s regulation in the cryptocurrency field is actually relatively conservative, as each token launched requires approval, and to this day, stablecoins have not been approved. Even so, Japan still allows retail investors to trade a large number of tokens, ranging from dozens to hundreds on different exchanges. In contrast, since Hong Kong introduced its licensing system, only 4 tokens have been allowed for retail trading, which many people globally find somewhat ‘ridiculous.’ While we acknowledge that many tokens are of low quality, if even high-quality tokens are only allowed to be 4, isn’t that a bit too conservative?
Chiu Duncan: This has actually been mentioned before. To be honest, if you are only issuing tokens for the Hong Kong market of 7 million people, that might not necessarily make money.
Colin: Yes, but everyone still feels that the current number is too small, which is a bit hard to understand.
Chiu Duncan: Regarding the protection of retail investors, I think Hong Kong is actually similar to Singapore. You mentioned that some people come to Hong Kong to issue tokens, but if it’s just for the market of 7 million people, then that direction itself isn’t very appealing. The key point is still about how to launch products in Hong Kong while being able to reach different types of investors.
For example, professional investors (PI), Hong Kong may be the place with the most family offices and professional investors in Asia. If your product is aimed at PIs and family offices, then the regulations will be relatively more relaxed.
However, if you are targeting retail investors, you indeed need to consider whether this market is worth investing in. We must be cautious about regulations for retail investors, so this definitely needs to be advanced step by step, and it’s impossible to open everything all at once.
Comparison with Singapore and the idea of ‘growing the pie’ in the Web3 market.
Colin: Singapore’s recent policies have indeed become stricter, which may be related to its anti-money laundering requirements. They are also ‘driving away’ some institutions in the crypto space. What is your view on this situation? Could this be an opportunity for Hong Kong? We have also heard that many institutions have moved back to Hong Kong from Singapore.
Chiu Duncan: I believe the opportunity for Hong Kong does not lie in the policy changes of other countries, but in the overall expansion of the Web3 market itself. The key is how to grow this pie larger, how to introduce more products, and how to encourage more people to come here to try, explore, and issue different types of products through compliance in Hong Kong.
For example, we just recently passed regulations regarding stablecoins, which allows many already substantial stablecoin projects to seek compliant pathways in Hong Kong. Some successful stablecoins have already emerged in the market, but we also need some stablecoins that are recognized by the government and operate within the legal framework. Therefore, our current focus is on exploring products that have not yet appeared in the market or may have new variants.
As long as Hong Kong can launch attractive and good products, it will attract funding. In the past, a lot of the capital in our stock market came from overseas, including family offices, professional investors, etc. These have always been the depth of Hong Kong’s financial market.
So the key is the adaptation of new products. If you have new products, you can attract more ‘professional money’ to invest in Hong Kong, bringing in more professional investors to participate in this ecosystem, which is a very critical matter.
As for Singapore’s current policy measures, I do not believe they are completely abandoning this field. They actually are actively promoting some projects, such as their own CBDC, and their compliance requirements for banks and Financial Institutions are also more in-depth than ours.
For many international Institutions, holding crypto assets in Singapore is indeed more convenient than in Hong Kong; these are areas we need to learn from. I believe that Singapore’s current tightening of policies may just be a short-term adjustment, but in the long run, the industry will ultimately head towards compliant development.
In the future, many countries will promote the compliance and development of the crypto industry, and this has become a global trend.
Analysis of the market opportunities for stablecoins and the advantages of the Hong Kong dollar stablecoin.
Colin: You also mentioned that the hotspot this year is stablecoins. Recently, the mainland government seems to be pushing for it vigorously, including offshore renminbi stablecoins. Hong Kong might become the center or exporter of stablecoins in the Greater China region. What do you think about this matter? There are also some voices questioning whether this will be just ‘a lot of noise but little action’, because stablecoins like USDT and USDC are already well-established, with strong brand effects and many users. So whether it’s the Hong Kong dollar stablecoin, US dollar stablecoin, or offshore renminbi stablecoin, in what aspects does Hong Kong have opportunities? Does it have competitiveness?
Chiu Duncan: First of all, I agree that stablecoins are still in a very early stage, only in the past few years. Currently, the market issuance is around 250 billion to 260 billion US dollars. Many market research reports predict it may reach 1.1 trillion or even 2.1 trillion in the future. I can’t assert specific numbers, but it can be confirmed that there is still a lot of growth potential in the market.
From the perspectives of product availability, cost, and trading efficiency, stablecoins are very practical tools, so I believe they have great potential for market development. In the discussion about stablecoins, we clarify a direction: it’s not about seizing the existing 250 billion US dollars market share, but about expanding to new user groups that have not yet been covered.
In international trade scenarios, many businesses, especially state-owned enterprises, central enterprises, or listed companies, currently cannot accept non-compliant stablecoins. They cannot accept certain stablecoins being circulated in the market, which indicates there is an unmet market demand.
The second point is about the potential of the Hong Kong dollar stablecoin. The Hong Kong dollar itself is a currency backed by the US dollar, pegged at a 1:1 ratio, so the structure of the Hong Kong dollar stablecoin is similar in principle to the US dollar stablecoin. If a US dollar credit crisis really occurs in the future, the Hong Kong dollar has both the US dollar as support and the Hong Kong government’s fiscal reserves as additional backing.
I cannot say that the stability of the Hong Kong dollar is necessarily superior to that of the US dollar, but at least we have dual support: the US dollar and the reserves of the Hong Kong government. From the perspective of asset backing alone, the Hong Kong dollar stablecoin may have advantages in certain aspects. Of course, whether it ultimately has market competitiveness will depend on whether users accept it and are willing to use it.
However, as mentioned earlier, there are still many users who have yet to use stablecoins, and many institutions currently cannot use existing US dollar stablecoins. This new incremental market alone is already significant.
As for how much Hong Kong should issue, it ultimately needs to be decided by the Monetary Authority. However, it is believed that once issued, as long as the product is compliant and there is demand, there will still be quite a few users.
Will Hong Kong reject unlicensed projects and what is the regulatory outlook for DeFi?
Colin: There are concerns in the industry about whether Hong Kong will also start to expel all unlicensed cryptocurrency practitioners in the future, like Singapore? Many practitioners, although based in Hong Kong, do not actually provide services locally; their clients are outside Hong Kong. The situation in Singapore is similar, especially with stricter management regarding DeFi. What do you think? Will Hong Kong also require all unlicensed projects to withdraw in the future?
Chiu Duncan: First of all, we still adhere to the policy rhythm of ‘moving steadily,’ which is the primary principle of regulation in Hong Kong. Our goal is for all institutions conducting business in Hong Kong to be licensed. If you operate a business in Hong Kong and promote or sell services to local users, you must hold a license.
If your business is based in Hong Kong but does not target the local market, instead serving overseas, it will depend on the specific circumstances. However, as long as you provide services to local residents in the local market, holding a license is a clear requirement.
Colin: What about DeFi? After all, DeFi is a permissionless system; will Hong Kong not welcome DeFi in the future? Could there even be a requirement for these projects to leave?
Chiu Duncan: There is currently no discussion about banning DeFi, nor is there such a policy direction. To be honest, the number of people truly engaged in DeFi in Hong Kong is not very high.
We have always insisted on being market demand-oriented. If there is clear demand for DeFi in the market in the future, the government will certainly consider whether some form of regulation is needed, such as registration, licensing, and other measures. This will be decided based on market survey data.
We have always conducted market research, for example, asking practitioners what businesses have been developed in Hong Kong and which businesses they believe are suitable for development through a licensed approach. We have continuously collected this feedback.
Next, we will also launch more types of licenses, including custodial licenses, dealing licenses, etc. Relevant laws are also being revised to adapt to the needs of trading and custody models of new products.
As for DeFi, there is currently no clear regulatory direction internationally, and DAO (Decentralized Autonomous Organization) is also in an exploratory stage. Therefore, we still need to observe how the entire market develops, how future directions will evolve, and then decide on strategies.
The role of Hong Kong and the layout of technical talent under the “front-store and back-factory” model.
Colin: Under the current US-China situation, many hope Hong Kong can become an export hub for Web3 in Greater China. Many companies are currently adopting the “front-store and back-factory” model, where executives, owners, or core teams are based in Hong Kong, but technical teams or back-office operations are located in Shenzhen, the mainland, Hangzhou, and other places. What is your view on this Web3 model? What role does Hong Kong play in it?
Chiu Duncan: This model has actually taken shape. Currently, in the development process from blockchain to cryptocurrency, many participants, especially those working on hard technology, are mostly Chinese. Most of the developers and technical teams I have encountered come from the Chinese community, so the influence of Chinese individuals in this industry is very strong.
Moreover, technical development itself requires continuous innovation. In this regard, Hong Kong’s advantage lies in its strong financial sector, which has many outstanding professionals. Therefore, how to combine talents from both finance and technology is what I believe to be the greatest potential for Hong Kong’s development of Web3.
Additionally, you just mentioned Japan and South Korea; they appear more like independent markets. Hong Kong and Singapore’s positioning is closer as they are one of the financial hubs of Asia. In comparison, although Singapore acts quickly, the depth and flow scale of its financial market is not as significant as that of Hong Kong, which has a larger capital pool and product system.
Although the Middle East started early in Web3 and is more willing to take risks, there is still a significant gap compared to Hong Kong in terms of product management and international market credibility.
Therefore, from the overall development perspective of Web3, as long as Hong Kong can maintain its development speed while ensuring stability, it can maintain an important position in Asia.
Reasons and strategies behind the conservative attitude of American Web3 giants towards Hong Kong.
Colin: Indeed, we have also observed in our practical work that top American Web3 companies like Coinbase and Circle have their Asia-Pacific headquarters located in Singapore. They seem to be more cautious about Hong Kong and have some concerns. What is your view on this matter? Should Hong Kong be more proactive in attracting these leading American companies, or continue to focus on serving the Greater China region?
Chiu Duncan: This question actually involves many levels, especially some external factors. Some things we can control, while others are beyond our control. We can only do well in things that are within our controllable range.
Our attitude towards companies from different countries abroad has always been open and not limited to any specific country. I can clearly state that Hong Kong still has enterprises operating here from all over the world, and there are various people from different backgrounds living here, including many from Europe and America.
Therefore, from a historical perspective, the current situation is just a small point in the long river of history. The circumstances ten years ago are different from now, and we cannot predict what it will be like ten years from now. Thus, we will not make strategic adjustments due to temporary changes in international relations.
I believe Hong Kong must adhere to its friendliness and openness towards the international market, which is one of the fundamental reasons for our past success. Especially in Web3, we can only focus on solidifying our foundations.
For example, regarding our legislative system, if there are areas that are not good enough, we will discuss them with the relevant regulatory institutions; we will actively promote what we can and accept reality for what we cannot. At the same time, we need to focus on what products can be innovated and launched in Hong Kong, and how to develop these products within a compliant framework. These are currently the most important matters.
The future development of Web3 is very difficult to predict. Just like artificial intelligence, while continuously driving technological breakthroughs, it is also influencing the entire landscape of Web3.
Therefore, no one can say for sure what the market will look like in five years. I believe the most critical aspect for Hong Kong now is to maintain our openness and freedom. This includes the free opening to international markets and the threshold for international capital entering Hong Kong is almost zero.
These will always be important capital for Hong Kong to position itself on the global fintech stage. As for external factors that we cannot control, we can only let nature take its course. What Hong Kong can do is to improve itself.
The potential and legal barriers of stock tokenization in Hong Kong.
Colin: Regarding stock tokenization, this topic has become very popular recently, especially with many US stock tokenization projects being launched one after another. Some scholars from the mainland have also suggested whether Hong Kong or mainland stocks can be tokenized to allow more global investors to participate. However, during a discussion with friends yesterday, someone mentioned that Hong Kong’s laws seem to stipulate that only the Hong Kong Stock Exchange can conduct stock trading. Does this legally close off this avenue? What do you think? Is there any possibility for innovative products in this area?
Chiu Duncan: I believe this must be an interactive process, and it depends on the overall direction of the market. Indeed, local practitioners in Hong Kong have also proposed ideas for tokenization.
Regarding legal issues, I believe that some current regulations are products of the past. The legal framework at that time did not consider the trends in today’s technological development, nor did it foresee methods for buying and selling equity products such as stocks using tokens or blockchain technology.
Therefore, whether tokenization can be promoted in the future still depends on the development of the entire market. In my personal opinion, I hope that in 10 or 15 years, not only stocks but also all traditional assets, including bonds and hard assets, can achieve on-chain trading. This would eliminate a large number of intermediaries, reduce costs, and build a more efficient financial market structure.
This is exactly the potential that blockchain possesses, but achieving this will take time and depends on the development of Technology. If certain issues arise during the process, such as hacker attacks or security vulnerabilities, these could also undermine the overall confidence in the market.
Technology will continue to advance, but more importantly, it must instill confidence in users. Only when people trust this technology can all financial products truly achieve on-chain status. If Technology takes a step back, the entire tokenization vision may also be forced to slow down.
So, I believe this process needs to be gradual, continuously observing market demand and technological capabilities, and then promoting corresponding innovations and regulatory adjustments.
Colin: Currently, it is still in the discussion phase and has not yet reached a practical level that can drive forward.
Chiu Duncan: I do feel that someone has raised relevant issues, but it is still in the preliminary stage.
The strategic significance of Hong Kong’s development of Web3 is related to its complementary relationship with the mainland.
Colin: Lastly, let me ask one more question. You also mentioned that the United States has now placed artificial intelligence and blockchain on the same strategic level, and its ‘Technology Czar’ is responsible for these two fields. However, if Hong Kong develops AI, it will clearly face intense competition from places like Hangzhou, Beijing, and Shanghai on talent. Hong Kong may not have a significant advantage in this area. However, the Web3 field offers Hong Kong a unique advantage, especially considering the regulatory constraints on the mainland. Hong Kong can meet the demand and talent needs for Web3 across Greater China. So how does the Hong Kong government, lawmakers, or senior officials view Web3? Is it regarded as an important pillar for Hong Kong’s future rejuvenation, or merely a part of ordinary industry development?
Chiu Duncan: I must clarify once again that I personally emphasize that Hong Kong cannot and should not compete with the mainland. We have never been in a competitive relationship, but rather a complementary one. From the past ‘three come one supplement’ model, to later helping mainland companies raise funds and go public in Hong Kong, to now hoping to assist mainland technology companies to ‘go overseas’ by establishing standards through Hong Kong and connecting with the international community, this has always been a path of cooperation.
Hong Kong should become a window for mainland technology, through which we help Chinese companies establish trustworthy standards internationally, including how artificial intelligence handles data and how to build secure language models (LM), etc. This cannot be separated from Hong Kong’s bridging role.
As you said, developing an AI engine may require thousands or even tens of thousands of technical talents, and currently Hong Kong does not have such a technical manpower foundation. Naturally, we will not view this issue with a competitive mindset. What Hong Kong needs to do is to empower mainland companies and form a collaborative relationship with the mainland, especially in coordination with Shenzhen. I never think there is any ‘competition,’ but rather we are jointly promoting development.
If everyone is still stuck in the old mindset that ‘Hong Kong needs to compete with the mainland’, then they have indeed been misled by some public opinion or media. Sometimes outsiders love to use exaggerated terms like ‘ruins’, but we do not need to pay attention to these voices. What’s important is to recognize the direction and focus on the work. If we encounter issues related to laws, market access, or regulatory mechanisms, if they are reasonable, we will promote reforms.
Hong Kong has been successful in the past — when things are going well, everyone praises you; when encountering storms, outsiders criticize you. Paying too much attention to these external evaluations only wastes energy.
I think this government is actually very efficient in legislation, whether it’s Web3, cybersecurity, or data protection-related legislation, progress is fast. The core issue behind AI is data, and data governance must meet international standards. Hong Kong can just provide support for the country’s development of artificial intelligence in this regard.
So I am not worried at all about the so-called ‘competition.’ We just need to find our position in the national technology strategy map, see clearly in which areas we can participate, and in which parts we can support the country’s development, focusing on doing this well is the most important thing.
