Can Hong Kong remain a tech leader in the face of US and Chinese regulation?

Thursday - November 9 2023, 15:53 UTC - 1 year ago

The conversation in Hong Kong last week was about changing the city into a Web3 technology hub to leapfrog advanced economies in Europe. The local government released its own NFTs and a tokenized bond, leading global Web3 projects to visit and explore investment opportunities. Of course, with China’s ban on cryptocurrencies, a big risk factor is Beijing potentially changing their mind and stopping Hong Kong’s exploration. A social experiment currently involves a group of Chinese women using AI tools to generate 4 female characters and facilitating conversations between users and these figures through WeChat.

We were far from the courtroom where Sam Bankman-Fried was found guilty on seven criminal charges, but everyone still wanted to talk about him. That said, I have a feeling the conversations I heard last week were pretty different from the ones in the US.

The city’s top official, Chief Executive John Lee, was there to discuss how the city could reinvent itself as a technology hub and capitalize on the big bets it has made over the past year on blockchain and cryptocurrencies. Yat Siu, founder of Animoca Brands, a homegrown Web3 startup that was clearly the star of the two-day event, told the audience on Friday, "This is the closing of a dark chapter of the industry … now we can start moving forward." .

The city used to punch above its weight in finance and trade, but its importance in these sectors has been falling. And as tech industries have powered exponential growth in places like Shenzhen (which is right across the border in mainland China), Hong Kong has missed out on much of that boom. Crypto, though, could offer a relatively easy pivot.

During the FinTech Week last year, the local government released its own NFTs and a tokenized bond. Since then, leaders of global Web3 projects have visited Hong Kong and explored investing there, says Gary Liu, founder of two Hong Kong–based Web3 startups, Terminal3 and Artifacts Lab. "While everyone else is in a bear market, Hong Kong is rising up," he says.

"I anticipate Hong Kong to probably be finished with putting in place all the legal regulatory framework way ahead of Europe," she told me at the conference. "It can literally leapfrog Europe." That could entice more Web3 companies and investors to set up shop in the city.

But so far, the city’s government seems undeterred. In a keynote speech, Christopher Hui, Hong Kong’s secretary for financial services and the treasury, said: "We have been asked many times whether JPEX will affect our determination to grow Web3, the answer is a clear no." .

Beijing’s attitude toward crypto will be another big risk factor. While the central government has famously banned cryptocurrencies, it seems to have given Hong Kong implicit consent for its tech experiments. It may hope to use the city as a sandbox to determine what China itself should do with Web3. Yet there’s no guarantee Beijing won’t change its mind and stop Hong Kong’s exploration. To me, that, not SBF, was the elephant in the room last week.

In June, a group of Chinese women started running a social experiment. They used AI tools to generate photos of four female characters: a sexy rich woman, a sassy sister, a girl next door, and an underage girl named Xiao Yu. They created profiles for these fictional characters, could have conversations with them via WeChat, and encouraged other users to do the same.