In 2045, most parts of the earth have become slums. In order to escape the chaotic reality, people put on VR glasses and enter the virtual reality game world "Oasis" - where they work, entertain and live, and players win digital wealth by completing games.
This is a scene described in the once popular science fiction movie "Ready Player One", which opened the door to the "metaverse" for many people.
What is the Metaverse?
Yu Jianing, Co-Chairman of the Blockchain Committee of China Communications Industry Association:
“‘Metaverse’ is a general term for the next generation of the Internet. Like Web 3.0, it describes the next generation of the Internet.”
1
Before entering the Web3.0 era, we experienced the Web1.0 and Web2.0 eras.
Tong Yi, Co-Chairman of the Hong Kong Blockchain Association (HKBA):
"Web 1.0 was only readable; around 2004, Web 2.0 was born, which is both readable and writable, and interactive; Web 3.0 is the value internet, which gives value to the huge amount of data and intellectual property generated by users."
In the highly "centralized" Web 2.0 era, Internet giants have monopolized commercial interests and discourse power. During the 2016 US presidential election, social media giant Facebook was sued for allegedly allowing the theft of personal data of tens of millions of users to influence the results of the presidential election.
In the Web 3.0 era, these companies will no longer have absolute power. The main goal of Web 3.0 is to get rid of the control of centralized platforms such as Facebook.
To achieve the goal of "decentralization", the key technology is the "blockchain" derived from Bitcoin.
In 2008, Bitcoin came into being.
A mysterious man named Satoshi Nakamoto introduced a peer-to-peer electronic cash transfer system. What circulated in this system was not any legal currency, but a unit called Bitcoin. At the same time, the "blockchain" technology came into being.
Yao Zhaoming, professor of computer science at the University of Hong Kong and director of the Fintech Blockchain Laboratory:
“The underlying technology that Web3.0 relies on is blockchain.”
2
With the support of "blockchain" technology, virtual assets such as virtual currency have the characteristic of "decentralization" - transactions can be completed without the supervision of banks or institutions.
Such characteristics have also been targeted by some criminals. According to statistics from the Hong Kong Cyber Security and Technology Crime Bureau, there were 1,663 cases involving virtual assets from January to September 2022, and the amount involved in the cases involving virtual assets exceeded HK$1.1 billion. In August 2022, the Hong Kong Customs uncovered a case of money laundering using virtual bank accounts and virtual currency trading platforms, involving a total amount of up to HK$411 million.
In addition to the money laundering problem, the roller coaster market of Bitcoin and other homogeneous tokens often catches investors off guard. After the birth of Bitcoin, various virtual currencies have sprung up like mushrooms after rain.
Along with the dream of "getting rich overnight" comes a variety of risks that are hard to guard against. In May 2022, the LUNA cryptocurrency, once known as the "Moutai of the cryptocurrency world", suddenly collapsed, plummeting by more than 99%, and tens of billions of dollars of assets were wiped out, leaving investors with nothing.
Finn Brunton, professor at the University of California, Davis and author of Digital Cash:
“The collapse in the value of cryptocurrencies, especially Bitcoin, has been devastating.”
3
With the development of "blockchain" technology, NFT, Non-Fungible Token, and "non-fungible tokens" have emerged, setting off an investment boom around the world.
Unlike "homogeneous tokens" such as Bitcoin, NFT is a unique virtual asset built on the "blockchain" in the form of a token, which is tamper-proof and non-copyable. For example, a unique picture, a virtual character, or even an article posted on a social media platform can become an NFT. In 2022, former US President Trump released a series of NFT digital collections printed with his portrait.
As a virtual asset, the risks behind NFT cannot be underestimated. In recent years, an NFT called "Bored Ape" has become popular all over the world. American singer Justin Bieber, Brazilian football superstar Neymar, American "Queen of Music" Madonna and other celebrities have purchased "Bored Ape" NFT. However, in July 2023, "Bored Ape" plummeted by more than 80%. An "Bored Ape" NFT purchased by American singer Justin Bieber for $1.3 million in 2022 fell to about $59,000.
The ups and downs of NFT have also attracted ridicule from netizens: "The one that can be sold is called NFT, and the one that cannot be sold is called JPG."
4
In October 2022, the Hong Kong Special Administrative Region Government issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong", taking a high-profile step into the virtual asset field and drawing a blueprint for the development of Hong Kong's Web3.0.
Just as Hong Kong was seizing the initiative in the development of virtual assets, in November 2022, FTX, the world's second largest cryptocurrency exchange by trading volume, suddenly declared bankruptcy, cryptocurrencies fell across the board, and the virtual market was shrouded in gloom.
FTX founder Sam Bankman-Fried, nicknamed "French Fries Brother", was charged with more than a dozen crimes including wire fraud and money laundering, and faces up to 115 years in prison. It took less than three years for FTX to go from the center of attention to the altar.
U.S. Attorney Williams:
"This is one of the biggest financial frauds in American history."
Faced with the sudden collapse of FTX, Hong Kong chose to go against the wind and embrace the opportunities in the development of virtual assets.
Hong Kong Financial Secretary Paul Chan Mo-po:
"The collapse of virtual asset platforms proves one thing: when we embrace technological innovation, we must do a good job of supervision and move forward steadily and prudently."
5
On June 1, 2023, Hong Kong’s new virtual asset trading regulations, “Guidelines for Virtual Asset Trading Platform Operators”, were officially implemented, ensuring that virtual asset transactions in Hong Kong are compliant and legal at the government level.
Hong Kong Legislative Council Member Wu Jiezhuang:
"This is the driving force for Hong Kong's future. We are confident that Hong Kong's laws and regulations can enable the industry to move forward."
Under the new regulations, all virtual asset trading platforms operating virtual asset exchange businesses in Hong Kong or promoting their businesses to Hong Kong investors need to apply for a license from the Hong Kong Securities and Futures Commission. The Securities and Futures Commission will review the operating qualifications of each platform in accordance with the current system's Securities and Futures Ordinance and Anti-Money Laundering Ordinance. Such regulation has, to a certain extent, avoided the cause of the previous FTX trading platform crash.
For retail investors who want to participate in virtual asset transactions, the new regulatory policy also opens up the window for the first time. Retail investors can choose to trade cryptocurrencies with larger market capitalizations such as Bitcoin and Ethereum through licensed trading platforms.
Zhou Geng, Head of Asset Management Department of China Merchants Securities Hong Kong:
“Hong Kong hopes to create a safe environment first to ensure that what you do is safe and that money will not evaporate for no reason. Under this premise, we will gradually promote trading products suitable for local investors and business models that allow everyone to participate.”
6
In 2010, an American programmer suddenly had an idea to buy two pizzas with 10,000 bitcoins. His bold attempt opened a new chapter in the history of cryptocurrency participating in real consumption. In just over a decade, cryptocurrency has grown from a niche geek experiment to an economy with a market value of hundreds of billions of dollars.
Walking around the 18 districts of Hong Kong, you will see Bitcoin ATMs scattered throughout the streets and alleys, allowing citizens to trade cryptocurrencies with cash anytime and anywhere. Crypto assets have become a trend in Hong Kong.
Since October 2022, more than 80 virtual asset-related companies have expressed their intention to enter Hong Kong. The implementation of the new regulations will undoubtedly create new opportunities for Hong Kong to undertake global virtual assets and compete for the position of a global virtual asset center.
Zhou Geng, Head of Asset Management Department of China Merchants Securities Hong Kong:
“If Hong Kong can take advantage of this opportunity to move truly valuable things to the blockchain for investors from all over the world to invest in; and attract registered investors from all over the world to Hong Kong and Greater China, it can provide great vitality for the development of regional virtual assets.”
7
In the Oasis world in the movie Ready Player One, the digital wealth that players win by playing the game is all assets with real value that they can freely control. Today, in the real world, the third-generation Internet Web3.0, which is built on virtual assets, has made this Oasis no longer just a utopian fable.
Tong Yi, Co-Chairman of the Hong Kong Blockchain Association:
“The combination of the Metaverse and blockchain technology makes the value internet of Web 3.0 even more valuable, because it gives value to the huge amount of data and intellectual property generated by users.”
In 2021, Christie's auctioned a purely digital artwork for the first time and accepted cryptocurrency payments. The NFT work "Everyday: The First 5000 Days" created by digital visual artist Winkelmann was sold at a record-breaking price of US$69.3 million. In November of the same year, an exhibition was held in New York, USA, which truly brought digital artworks into reality.
At present, although the Web3 industry is still in its infancy, its huge development potential has still attracted a lot of capital to try it out.
Zhou Geng, Head of Asset Management Department of China Merchants Securities Hong Kong:
"Although virtual assets have 'virtual' in their name, the essence of finance is that they are intangible and invisible, and there is no qualitative difference from traditional finance. The underlying layer of virtual assets is blockchain technology, which can significantly improve the traditional financial industry. efficiency while reducing costs.”
8
Faced with this booming yet wildly growing virtual track, although countries and regions have different attitudes, regulation is undoubtedly a global trend.
As one of the countries that maintains a friendly and open attitude towards virtual assets, Singapore has entered the ranks of Web3.0 regulators early on. In 2019, the Singapore Parliament enacted legislation on crypto regulation for the first time, passing the Payment Services Act to regulate the operations of cryptocurrency companies and placing all crypto services under the jurisdiction of the Monetary Authority of Singapore.
Huang Lok-yan, Director of Licensing Division and Head of Fintech Group of the Hong Kong Securities and Futures Commission:
“Singapore previously used a payment method for regulation, but now it will begin to incorporate investor protection elements into regulatory provisions.”
Compared with Singapore, the United States is not at the forefront of virtual asset regulation, and its overall policy pursues controllable risks. In 2022, the United States released its first draft regulatory framework for the cryptocurrency industry, but there has been no sign of legislation. Prior to this, the United States regulated cryptocurrencies as securities and constrained them with the current Securities Act regulations.
After years of exploration, Hong Kong has now found a crypto regulatory path that suits it. With the new regulations establishing a regulatory framework for virtual asset service providers, Hong Kong will achieve comprehensive coverage of all virtual assets and actively embrace the arrival of the Web3.0 era.
9
As a highly open and outward-looking economy, Hong Kong has undergone three industrial transformations in the past few decades. However, compared with financial center cities such as Singapore, Hong Kong's development focus is still concentrated in traditional areas such as finance and trade. A single economic structure can no longer meet Hong Kong's competitive needs.
Since 2023, the local Web3 atmosphere in Hong Kong has been hot. In January 2023, Hong Kong established the Cyberport Web3 Base, and the budget announced that it would allocate HK$50 million to promote the development of the Web3 ecosystem. On April 11, Hong Kong established the Web3.0 Association, and in the future it will set up the Web3Hub Fund to support more overseas Web3 companies to settle in Hong Kong.
In addition to policy guidance, the SAR government is also taking practical actions to integrate innovative technologies such as blockchain into real-world construction applications. The "Precious Metals and Gem Dealer Registration System" launched to combat money laundering has introduced blockchain technology to verify the authenticity of dealer licenses. This is also the first system connected to the SAR government's "Shared Blockchain Platform."
The highlight moment of Web3.0 is just beginning in Hong Kong. Looking at the end of the race, Hong Kong still has a long way to go in the future.
Wu Wenqian, a practicing lawyer in Hong Kong:
“Hong Kong’s proximity to the Greater Bay Area can help attract talent from different directions, which will be helpful for Hong Kong’s development.”