Interview with Senior Manager of InvestHK's Fintech Division: Can Hong Kong Become a Digital Asset Hub?
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Interview with Senior Manager of InvestHK's Fintech Division: Can Hong Kong Become a Digital Asset Hub?
Hong Kong has the second-highest number of high-net-worth investors globally and is Asia's second-largest private equity financing market.
Navigating Web3 tides with focused insightsDate: Monday, October 31, 2022
Host: Leon – Co-founder of CrossSpace, Founder of TYPE V DAO / Worldwide NFT
Guest: Terry – Senior Manager, Fintech Team, InvestHK
Venue: CrossSpace Twitter Space
Co-organizers: CrossSpace @CSpaceOfficial, Kucoin @Kucoincom, KuCoin Labs @KClabsOfficial
Interview Summary:
1. The Hong Kong SAR government recently mentioned its vision of becoming an international virtual asset hub. Many Web3 technology innovators are closely watching this development. What initial preparations do you think the government has made toward achieving this goal?
[Terry]: Going back to around 2017, the SFC and regulatory authorities have consistently issued regulations, such as establishing a business framework for exchanges. Historically, Hong Kong's regulatory approach has been not to create new laws or policies, but rather to apply existing legal frameworks to virtual asset trading and asset management.
Currently, virtual asset regulation follows the SFC model, divided into three areas: 1) virtual asset trading, 2) virtual asset advisory services, and 3) virtual asset management.
In the early stages, regulations were relatively restrictive. As a result, some major exchanges shifted their focus to other markets. The government has taken note of this trend and has initiated improvements through extensive public consultations, including closed-door meetings over the past two years with major industry exchanges to discuss how Hong Kong’s future regulatory framework should be structured.
Based on feedback from existing exchanges, current regulatory constraints—such as being limited to professional investors and no leverage trading—have impacted exchange operations. The government plans to improve the regulatory model going forward, including exploring possibilities for retail market access, by actively listening to market suggestions and shaping future policy accordingly.
However, Hong Kong will continue to prioritize investor protection, especially for retail investors.
For startups, the government has laid preliminary groundwork to support favorable conditions in Hong Kong—from company establishment to talent recruitment and access to funding.
2. 1) StepN, a well-known Move-to-Earn company in the Web3 space, has set up its office and regional headquarters at Cyberport, which is highly encouraging for many Web3 companies. Could you share specific government policies and criteria aimed at attracting high-quality companies like this to establish offices in Hong Kong? 2) For Web3 tech startups still in early development stages, does the government offer any funding support? Are there size requirements for eligible companies?
[Terry]: InvestHK is the government department closest to the industry. Companies newly arriving in Hong Kong can consult InvestHK on matters regarding local regulations, policies, startup support, or talent entry/residency. InvestHK provides comprehensive information and assistance, such as connecting companies with talent pools in science parks and guiding them through relevant government support programs.
The government does not impose size-based criteria on companies. For example, early-stage startups can apply for seed funding from Cyberport or request office space within the park. Mainland founding teams can register online as a Hong Kong company and then apply for Cyberport’s seed fund to help facilitate relocating their business to Hong Kong.
3. Web3 tech startups require financial support to grow. So let’s get practical—what kind of funding support will government-backed accelerators provide to Web3 startups?
[Terry]: There are mainly three directions: 1) Funding available through innovation parks, 2) Government grants related to talent, and 3) Direct investment by the Hong Kong government in startups.
The main parks are Cyberport and Science Park. Cyberport disburses funds in stages: Early stage – HK$100,000 seed fund, available even during the idea phase; Startup phase – HK$500,000 incubation program; Mid-stage – HK$300,000 accelerator grant; For companies with overseas expansion needs, Cyberport offers an additional HK$200,000. Total potential funding is approximately HK$1 million, and companies can apply for relevant support at any stage.
Science Park also offers stage-specific programs. Early-stage teams can similarly apply for HK$100,000. Companies of certain scale may apply for a HK$1.29 million incubation program. As they mature, they can access the corporate acceleration program offering up to HK$4.8 million. Compared to Cyberport, Science Park has one basic requirement: R&D personnel must account for more than 50% of total staff. Cyberport has no such requirement.
The Hong Kong government strongly supports scientific research, including cryptocurrency-related R&D. To assist companies in hiring researchers, the government has established a Research Talent Pool subsidy program. Each company can sponsor up to four researchers under this scheme, with monthly subsidies based on academic qualifications: Bachelor’s degree – HK$18,000; Master’s degree – HK$21,000; PhD – HK$32,000. Funding can last up to 36 months.
Finally, there is the Hong Kong Government Investment Limited. Following a model similar to Singapore, the Hong Kong government plans to establish a fund investing in companies within Cyberport and Science Park, or in promising startups. This year’s policy address announced an additional HK$30 billion injection, bringing the total fund size to HK$60 billion.
4. One key distinction of Web3 from traditional organizational models is bottom-up community-driven decision-making. Has the Hong Kong government recognized the importance of communities in Web3? And unlike previous top-down PR approaches, will the government engage and communicate with the industry via grassroots community channels?
[Terry]: From my observation, the Hong Kong government is gradually developing awareness in this area, though it takes time. Traditional industries tend to adopt conventional thinking and communication methods, but I do see signs of change. For instance, during FinTech Week, the government invited Web3 media outlets to conduct one-on-one interviews with government officials.
5. The Web3 sector includes companies focused on NFT social applications, DeFi, GameFi, infrastructure development, information and data security, as well as AI-focused R&D innovators. Could you briefly describe the Hong Kong government’s stance toward different sectors within Web3?
[Terry]: In my observation, for areas with stronger financial characteristics, the government remains cautious due to investor protection concerns. However, for Web3 applications related to gaming, art, film, and creative media, the government is more supportive and encouraging.
6. Over the past few years, Singapore has attracted numerous Web3 talents and tech startups. The recently concluded Token2049 further captured global attention. In your view, what are Hong Kong’s key advantages compared to Singapore in the Web3 space? And are there strategic differences in future development directions?
[Terry]: Hong Kong ranks second globally in terms of high-net-worth individuals and is Asia’s second-largest private equity financing market.
In terms of future developments related to digital currencies, Hong Kong’s main advantages include:
1. Mainland China’s top-tier Web3 companies can operate without political concerns;
2. Strategic geographical location and convenient connectivity;
3. Security Token Offerings (STOs) serve as a powerful tool for startups.
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