Why Hong Kong continues to be bullish on crypto

This story first appeared in China Report, MIT Know-how Evaluate’s e-newsletter about know-how in China. Enroll to obtain it in your inbox each Tuesday.

We had been removed from the courtroom the place Sam Bankman-Fried was discovered responsible on seven prison fees, however everybody nonetheless wished to speak about him. That stated, I’ve a sense the conversations I heard final week had been fairly completely different from those within the US.

The day after his conviction, I used to be at Hong Kong FinTech Week 2023, a brand new annual convention hosted by the native authorities. In contrast to folks within the US, the place the SBF trial is only one extra episode within the extended crypto winter, these in Hong Kong had been feeling rather more optimistic about all issues Web3. 

Town’s high official, Chief Government John Lee, was there to debate how town may reinvent itself as a know-how hub and capitalize on the large bets it has remodeled the previous yr on blockchain and cryptocurrencies. Yat Siu, founding father of Animoca Manufacturers, a homegrown Web3 startup that was clearly the star of the two-day occasion, informed the viewers on Friday, “That is the closing of a darkish chapter of the business … now we are able to begin shifting ahead.”

I attended panel after panel the place folks mentioned the way forward for tokenized belongings, central-bank digital currencies, and even NFTs—beaming with hopes that’d be arduous to seek out within the US. It felt as if I’d jumped right into a time machine; the executives of worldwide crypto heavyweights like Crypto.com and Bored Ape Yacht Membership attended the convention in particular person, whereas the CEO of Coinbase videoed in for a hearth chat. (I’ve to say I’m glad I didn’t go to the BAYC social gathering, a aspect occasion occurring on the identical time, which apparently left many attendees with “extreme eye burn.” Ouch.)

For these execs, Hong Kong is a uncommon place the place the federal government is welcoming them. Following main crypto failures final yr just like the collapse of FTX and Terra, and reviews in regards to the worthlessness of NFTs, many governments and observers have grown cautious of the business. However for Hong Kong, this new digital frontier looks like a chance to rewire its financial system. 

Town used to punch above its weight in finance and commerce, however its significance in these sectors has been falling. And as tech industries have powered exponential development in locations like Shenzhen (which is correct throughout the border in mainland China), Hong Kong has missed out on a lot of that growth. Crypto, although, may supply a comparatively simple pivot.

In the course of the FinTech Week final yr, the native authorities launched its personal NFTs and a tokenized bond. Since then, leaders of world Web3 tasks have visited Hong Kong and explored investing there, says Gary Liu, founding father of two Hong Kong–based mostly Web3 startups, Terminal3 and Artifacts Lab. “Whereas everybody else is in a bear market, Hong Kong is rising up,” he says.

What arguably issues most to those worldwide crypto gamers is that Hong Kong has been busy making a framework permitting them to legally present companies there. In Might, Hong Kong launched a licensing regime for retail crypto exchanges, and two firms have already been accredited to function. On the convention final week, audio system stored mentioning the prospect that Hong Kong would quickly concern extra laws on stablecoins—which can be an essential bridge between fiat cash and cryptocurrencies, and supply a basis for a lot of Web3 companies.

In contrast with different governments, Hong Kong has been shifting sooner in crypto laws whereas being constantly extra pleasant. It’s not the primary authorities to attempt crafting crypto regulation; Europe began exploring its Markets in Crypto Property Regulation in 2020, and Singapore and Japan additionally began years in the past. However Hong Kong has made vital progress in catching up in simply the final yr, says Linda Jeng, the top of world Web3 technique on the DC-based business group Crypto Council for Innovation. 

“I anticipate Hong Kong to in all probability be completed with putting in all of the authorized regulatory framework manner forward of Europe,” she informed me on the convention. “It might probably actually leapfrog Europe.” That might entice extra Web3 firms and traders to arrange store within the metropolis. 

However as with something on this house, shifting this quick is a high-risk wager. Crypto might transform much less transformative than initially promised, and there’s additionally the prospect of inadvertently enabling extra scams and traps. Simply in September, the native crypto scene was shaken by the collapse of JPEX, a crypto alternate that defrauded traders of $192 million price of belongings in Hong Kong. 

However to this point, town’s authorities appears undeterred. In a keynote speech, Christopher Hui, Hong Kong’s secretary for monetary companies and the treasury, stated: “We’ve been requested many instances whether or not JPEX will have an effect on our willpower to develop Web3, the reply is a transparent no.” 

Beijing’s angle towards crypto can be one other massive threat issue. Whereas the central authorities has famously banned cryptocurrencies, it appears to have given Hong Kong implicit consent for its tech experiments. It might hope to make use of town as a sandbox to find out what China itself ought to do with Web3. But there’s no assure Beijing gained’t change its thoughts and cease Hong Kong’s exploration. To me, that, not SBF, was the elephant within the room final week.

Do you assume Hong Kong made the precise resolution to welcome crypto and Web3? Let me know your ideas at zeyi@technologyreview.com.

Meet up with China

1. Whereas we’re speaking about Hong Kong: 

• Tens of 1000’s of residents emigrated after the crackdown on pro-democracy activism, however the native authorities is inviting folks from mainland China to maneuver there and fill the hole within the workforce. (Related Press)
• A scholar from Hong Kong, who returned from Japan to resume her ID doc, was arrested and sentenced to 2 months in jail for posting “seditious” content material on-line whereas overseas. (Hong Kong Free Press)

2. Chinese language social media platforms now require all customers with over 500,000 followers to show their actual names on-line. (South China Morning Publish $)

3. Authorities officers from China, the US, and Europe agreed to work collectively on AI governance on the UK’s AI Security Summit final week. (Reuters $)

4. For the primary time in additional than 40 years, the US is utilizing its personal cash to ship weapons to Taiwan. (BBC)

5. China’s richest billionaire constructed his enterprise empire by bottling pristine water. Its environmental footprint is worrisome. (Bloomberg $)

Misplaced in translation

In June, a bunch of Chinese language ladies began operating a social experiment. They used AI instruments to generate images of 4 feminine characters: an attractive wealthy lady, a sassy sister, a lady subsequent door, and an underage lady named Xiao Yu. They created profiles for these 4 characters on Chinese language courting apps to see whether or not and the way they’d be harrassed. To their shock, Xiao Yu, who clearly introduced herself as a 16-year-old lady, acquired essentially the most harassment. Once they lowered Xiao Yu’s fictional age to 14, the harassment solely intensified, accounting for half of all messages. Males requested her for suggestive photos, despatched unsolicited nudes, and even supplied to be her “guardian” in opposition to abuse earlier than asking whether or not she’d be considering some role-playing. 

The experiment shines mild on the extent of on-line baby abuse within the nation, in response to the Chinese language publication White Night time Studio. The issue is especially acute for youngsters who keep of their rural hometowns whereas their mother and father go away to work within the cities. One sex-ed advocate who performed a discipline research in rural southwest China this yr discovered that just about 80% of youngsters there have been uncovered to on-line abuse. 

Another factor

An upcoming online game referred to as “The Exit 8” places the participant in one of many worst conditions I can think about: trapped in a Japanese metro station, looking for an exit from a collection of infinite turns and diverging paths. The sport’s supposed play time is 15 to 30 minutes, the developer says. That appears wildly optimistic given real-life Tokyo mega subway stations.