The world has entered a new Cold War, and several perspectives on the Web3 landscape in Hong Kong
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The world has entered a new Cold War, and several perspectives on the Web3 landscape in Hong Kong
What is the decision-making logic behind Hong Kong's new Web3 policies?
Navigating Web3 tides with focused insightsAuthor: Meng Yan, Co-founder of Solv
Although I didn't attend last week's Web3 Carnival in Hong Kong, I was deeply drawn to it and closely followed the new ideas and insights emerging from the event. I learned a lot, but one thing particularly disappointed me: in public discussions, no one addressed the most critical question—what is the decision-making logic behind Hong Kong’s new Web3 policy?
This new policy in Hong Kong would be unimaginable without Beijing’s support—or at least its tacit approval. This then raises a series of questions: Why has the Hong Kong government made this decision? Why has Beijing allowed it? Is Beijing’s stance based on careful strategic calculation or mere expediency? In the future global contest involving politics, economics, and technology, will Hong Kong and Beijing’s attitudes toward Web3 strengthen, weaken, or remain inconsistent? Without thoughtful analysis and judgment on these issues, Hong Kong’s current Web3 development cannot be sustained, and even the achievements already made could be lost. Of course, this topic is sensitive and hard to discuss openly, so most people avoid it—I understand that. But seeing so many slogan-like bullish statements detached from fundamentals, I believe many are insincere.
So I raised this issue on Twitter, which led to an unprecedented situation: while I received many replies publicly, much of the real exchange happened through private messages and chat tools. Several people even asked me what others had told me privately. These conversations made me increasingly feel this topic deserves open discussion. I share the same concerns others have, but I also believe there are still meaningful perspectives worth sharing.
Of course, if we only focus narrowly on surface-level details, we’ll miss the bigger picture. We must analyze this within the context of current international dynamics. However, writing a comprehensive treatise isn’t feasible due to time and energy constraints. So I’ve adopted a middle-ground approach—presenting my views in a long-thread Twitter style: listing key points and logical frameworks without deep analysis, evidence, or sourcing for terms and concepts. This serves three purposes: first, to establish a clear record; second, to invite further discussion; third, to facilitate our internal strategic conversations later.
First, consider the era’s broader context.
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The world is entering a new Cold War phase, likely lasting 10–30 years, most probably around 20.
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This is a low-intensity, gray-zone Cold War. Both sides—the U.S. and China—have abandoned hopes of returning to cooperation, yet fear the consequences of intense confrontation. As such, they seek to manage conflict intensity, resulting in hesitant, shifting, and ambiguous positions, creating significant room for negotiation and backdoor coordination.
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The main battlegrounds of this new Cold War lie in technological innovation and real economy. China aims to leverage its strength in manufacturing to climb upward and gain dominance in innovation, achieving full autonomy across the innovation-to-production supply chain. The U.S., leveraging its lead in tech innovation, seeks to reclaim key manufacturing segments, reshore physical production, and reconfigure global supply chains.
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Each side faces critical vulnerabilities. The U.S. has two major risks. First, systemic financial risk arising from the historic weakening of the dollar and Wall Street. As supply chains reshore, prolonged inflation will force rate hikes to contain it, triggering massive capital inflows into the U.S. This reduces global dollar liquidity, undermines the dollar’s international role, and weakens Wall Street’s influence. While this benefits real economy revival, domestic employment, and the military-industrial complex, it introduces financial instability. Second, job displacement caused by the new technological revolution—more precisely, a widening gap where a small high-tech elite surges ahead while most ordinary Americans fall hopelessly behind, inevitably fueling deep social tensions. China faces three risks. First, after decades of debt-driven growth, with supply chain relocation and property bubbles bursting, deleveraging threatens economic stability, employment, and livelihoods. Attempting to print money to mitigate risks could trigger hyperinflation. Second, external blockades and restrictions may widen China’s innovation gap with rivals, risking systemic backwardness. Third, war risk.
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In a lukewarm Cold War where both sides are cautious and vulnerable, each will maintain broad channels of communication, coordination mechanisms, flexibility, and bargaining space. The greater this space, the more opportunities it creates for neighboring economies—especially those in competitive frontier zones.
Next, consider the current technological revolution.
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A new wave of technological revolution is unfolding in the U.S. Core technologies include: strong AI, autonomous vehicles, robotics, next-gen human-computer interfaces (e.g., brain-computer interfaces), quantum computing, advanced aerospace tech, satellite internet, bio- and genetic engineering, new energy, and advanced materials. Blockchain, as an institutional technology, will also play a significant role—but because of its openness and low diffusion barriers, it is not a primary competitive front.
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If this tech revolution transforms into an industrial revolution, it will determine the outcome of competition. The U.S. tech breakthroughs are still in early stages. Whether scattered advances across fields coalesce into a full-scale industrial revolution remains uncertain. But if such a revolution occurs in the U.S., most of its current economic and social challenges could vanish. China, lacking an established system for original innovation, has been prematurely pulled into this race, leaving it at a disadvantage.
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China will do everything possible to keep pace with the technological revolution. Losing the tech race is not an option—for if it falls behind, its existing supply chain advantages will evaporate, forcing unfavorable concessions. Thus, China must strive to stay competitive. The U.S. understands this clearly, hence its strict technological blockade aimed at preventing critical advancements from reaching China or being surpassed by it. In response, China will go all out to break through the blockade and achieve breakthroughs in key technologies, or at minimum, avoid generational lag. Beyond mobilizing domestic R&D, China will also seek access to advanced technologies through engagement with the U.S. and third parties. This struggle between containment and circumvention, combined with the ambiguity and negotiation space in the new Cold War, will generate abundant tech-related opportunities within China and certain surrounding regions.
Now, some thoughts on monetary and financial matters.
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The current U.S. interest rate hikes and capital repatriation are indeed eroding the dollar’s global standing. The BRICS push for de-dollarization is directly triggered by the Fed’s tightening cycle.
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China’s accelerated push for RMB internationalization at this moment can yield amplified results. However, the current model—relying on currency swap agreements—is unlikely to bring substantial seigniorage gains in the foreseeable future. Specifically, since China runs trade surpluses with most countries, under bilateral currency swaps, both sides effectively pay seigniorage, but due to China’s surplus position, the net flow means China pays more seigniorage than it receives. Yes, this weakens the dollar—but not in a way that allows the RMB to simply replace it.
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Another consequence of accelerating RMB internationalization is declining Chinese USD reserves and pressure on the Hong Kong dollar. Falling USD reserves in mainland China might lead to drawing on Hong Kong’s dollar reserves via RMB-HKD swap mechanisms, putting real strain on Hong Kong’s linked exchange rate system—especially amid ongoing U.S. rate hikes.
With this background laid out, we can now turn to the main topic.
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Blockchain serves four key functions: First, as infrastructure for digital currencies and digital assets. Second, as the foundation for Web3, enabling a next-generation internet built on shared ownership. Third, as a tool for humanity to control and constrain AI during a period of peaceful coexistence. Fourth, as infrastructure for allocating critical resources—including governance rights, energy, computing power, and data—within a massive distributed network comprising humans, AI, and robots. Therefore, blockchain is a pivotal technology in the next wave of technological revolution—a strategic battleground.
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However, competition in blockchain is less about hardware, technology, processes, or algorithms, and more about how to use blockchain to create new structures and mechanisms—it’s a contest of institutional innovation, not technological invention.
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Markets for digital assets struggle to thrive within large sovereign states but find fertile ground in contested frontier zones between great powers. Undeniably, after more than a decade of development, blockchain has spawned a free, gray financial market—highly innovative, yet rife with fraud, chaos, and moral hazard, operating as a lawless zone. During periods of geopolitical competition, major powers won’t tolerate such a gray market undermining their domestic financial order, so they tend to impose strict internal controls. Yet, having a limited, manageable offshore virtual economy in border regions enables useful communication, coordination, and backdoor deals between blocs—each side gaining something.
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Thus, active blockchain-based digital economies will emerge in Sino-U.S. competitive frontier zones—hence the ongoing “Web3 duet” between Singapore and Hong Kong. Both are rule-of-law jurisdictions unwilling to host fraudulent industries, so they will regulate Web3. The era of rampant ICOs and easy “yield farming” won’t return. But their approaches to what *is* permissible may differ significantly.
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Hong Kong’s Web3 strategy is transaction-oriented. Given China’s desire for Hong Kong to serve as a hub for trade, finance, currency, and technology exchange with the outside world—and given the U.S.’s conditional tolerance or even encouragement of this role—Hong Kong’s Web3 market will lean toward transactions. It will show higher tolerance for the existence and development of gray digital finance, seen in freer conversion services for mature mainstream digital assets like Bitcoin, Ethereum, and USDT, as well as favorable conditions for custody, collateralization, and trading. However, it will remain cautious or even strict regarding fundraising activities like ICOs.
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Hong Kong’s Web3 initiative remains in pilot phase and may face reversals. Having recently suffered a severe downgrade in its traditional financial center status—even facing pressure on its USD-linked exchange rate—Hong Kong hopes to regain global market share and redefine its identity through Web3. Yet Web3 is too new, with no proven success models elsewhere. Relevant officials may lack clarity on goals, strategies, measures, or contingency plans. Thus, from both Beijing’s and Hong Kong’s perspective, Web3 development is likely still experimental. If it fails to meet expectations, or worse, causes regulatory failures leading to financial risks or disruptive incidents, policymakers might reverse course. Hence, regulators won’t relax oversight—they’ll emphasize red lines and bottom-line safeguards.
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Singapore’s Web3 strategy is more稳健 (prudent). As the U.S. rebuilds supply chains, ASEAN nations remain focal points. Singapore, as a sovereign state within ASEAN, hasn’t seen its global logistics hub status weakened—in fact, it has strengthened. Likewise, its regional financial center role has grown over recent years. With a “winner’s mindset,” Singapore aims to go further in the Sino-U.S. rivalry, aspiring to become a dual hub for global logistics and digital finance—thus favoring stronger real-economy integration and closer ties with traditional finance (TradFi), acting with increasing caution.
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Singapore has lower tolerance for gray digital finance. A winner’s mindset also means heightened fear of failure. After the collapses of Luna, 3AC, and FTX last year, Singapore recognized the high risks and destructive potential of unregulated crypto institutions. It will thus prioritize formalizing and constructively guiding Web3 development, maintaining stricter thresholds and robust oversight for related businesses, showing less tolerance for gray-market activities.
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Neither jurisdiction is well-positioned to produce world-class 2C Web3 projects like social platforms or games. With small populations, both Hong Kong and Singapore build Web3 ecosystems atop their international financial hub status, emphasizing financial applications. Projects relying on massive user bases—such as Web3 social or gaming—are not their comparative advantage.
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Both will actively support RWA (Real World Asset) tokenization. Recent emphasis on RWA potential by institutions like BIS and Citibank suggests this direction will receive high priority in both places. Hong Kong, backed by China’s vast asset base, can serve as a powerful financial bridge. Singapore, strategically located along the world’s most critical supply chains, can expand trade finance RWAs across multinational supply networks.
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