The acceleration of Web3 Compliance process, Hong Kong becomes a new focus

Recently, a series of actions in the Web3 field by Hong Kong has attracted widespread attention in the industry. It is understood that the Hong Kong Securities and Futures Commission has received over 80 substantive operation reports, and it is expected that more than 130 virtual asset exchanges will ultimately apply for relevant licenses. Although Hong Kong's compliance policies are currently relatively lagging, many industry insiders still have optimism about Hong Kong's potential as an international financial center in embracing Web3.

Choosing exchanges based in Hong Kong not only focuses on the Web3 sector but also considers the overall layout of the financial world. This also explains why many exchanges choose to pursue a Compliance route in Hong Kong, rather than in places like Dubai, Poland, or Turkey. The Compliance sector holds enormous potential, and if executed properly, it could even change the global landscape.

However, the current cryptocurrency trading model is still relatively simple. There are mainly two models: one is direct trading between users and the order book on the exchange, the advantage being fast transaction speed and the ability to handle a large number of standardized products, but users lack bargaining power; the other is inquiry trading in social groups, which is flexible but lacks security guarantees. Industry experts point out that the current cryptocurrency trading world lacks tools similar to "over-the-counter trading platforms" in traditional finance.

Under the impetus of compliance policies in Hong Kong, many institutions and individuals with traditional financial backgrounds are preparing to lay out Web3 finance. However, this process is not easy. Traditional finance has a limited understanding of virtual assets, and it takes time to learn and adapt. Meanwhile, this field is full of uncertainties, and the return on investment is still unclear.

For traditional financial investors in Hong Kong, the threshold for DeFi (Decentralized Finance) is relatively high. In contrast, CeFi (Centralized Finance) is more in line with the usage habits of these clients. Traditional investors are more accustomed to investing through brokers, providing identification, and transferring funds from banks. The DeFi world requires users to first have a digital wallet and go through multiple steps to complete a transaction, which is not user-friendly for traditional investors.

However, it is not easy to operate a compliant CeFi in Hong Kong. Currently, Hong Kong's regulatory framework for virtual asset trading still has a certain conservativeness. For example, regulations require exchanges to store 98% of customer assets in cold wallets, which poses a huge challenge to the daily operations of exchanges. In addition, regulators require exchanges to self-custody customer assets and prohibit the use of third-party custody services, which raises higher demands on the exchanges' technical capabilities and compliance levels.

Despite facing numerous challenges, Hong Kong is still expected to become a bridge connecting traditional finance and the Web3 world. Through comprehensive user education, helping traditional investors gradually understand and enter the Web3 ecosystem will be key to future development.

In the current Web3 industry, there is a contradiction between short-term profits and long-term value creation. Many projects that can quickly generate profits often do not align with the goals of long-term builders. Builders who are genuinely working for the development of the industry face the dilemma of struggling to gain market recognition and short-term returns. To resolve this contradiction, support from long-term capital is needed, rather than relying on short-term speculative funds.

Looking ahead, despite the currently pessimistic atmosphere in the entire Web3 and cryptocurrency world, there are still some infrastructure projects that show the potential to change the industry and the world. However, without the support of large capital, these projects find it difficult to succeed on their own. In the context of global interest rate hikes and traditional capital's cautious environment, the Web3 industry faces new challenges and opportunities.

As a frontier of financial innovation in China, Hong Kong has unique advantages in promoting the development of Web3. Backed by the mainland market, Hong Kong is expected to achieve breakthroughs in areas such as digital currencies, bringing new changes to the global financial landscape. In the future, if Hong Kong can leverage its financial expertise under policy support, it is likely to make significant progress in the Web3 field, contributing importantly to the development of the entire industry.