TechCrunch: Hong Kong, the New Haven for Global Crypto Enterprises
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TechCrunch: Hong Kong, the New Haven for Global Crypto Enterprises
Compared to previous years, this year's Hong Kong has attracted more participants from outside mainland China.
Navigating Web3 tides with focused insightsBy Rita Liao, TechCrunch
Translated by Luffy, Foresight News
As U.S. regulators intensify scrutiny over cryptocurrencies, startups and founders in the crypto industry are turning their eyes overseas in search of friendlier business environments.
Hong Kong is one such destination. Seeking to reclaim its former status as a financial hub, Hong Kong aims to attract a new wave of entrepreneurs, technologists, and investors through crypto-friendly policies. So far, this strategy appears to be working.
In mid-April, Hong Kong’s annual Web3 Festival drew more than 50,000 participants from around the world. Compared to last year, there were noticeably more non-Chinese attendees. Past events felt like gatherings of cryptocurrency refugees escaping mainland China’s restrictive policies. This year, Hong Kong officials listened seriously to casually dressed founders from across the globe, many still battling jet lag. Cathie Wood, billionaire founder of Ark Invest, delivered a video speech despite not attending in person. Vitalik Buterin, Ethereum’s nomadic co-founder, made a surprise appearance.
It felt familiar: during the early days of the crypto industry, Hong Kong was a key base for foreign entrepreneurs running crypto firms, including FTX, Crypto.com, and BitMEX. Like other jurisdictions worldwide, Hong Kong cracked down on crypto activities after market volatility spiraled out of control, aiming to protect investors.
The turning point came in June last year, when the Hong Kong government embraced crypto trading legalization to attract retail investors, reigniting enthusiasm for Web3 in the region. Since then, Hong Kong has implemented a series of measures to regulate crypto-related activities, including a stablecoin issuance sandbox and a licensing regime for crypto exchange operators. It also followed the U.S. lead by recently launching a batch of cryptocurrency exchange-traded funds (ETFs) this week.
These moves stand in stark contrast to the U.S. government’s hardline stance against crypto startups. Participants at the Web3 Festival from the U.S., Europe, the Middle East, India, and elsewhere expressed optimism about Hong Kong’s growing momentum in Web3. For example, First Digital’s FDUSD, issued under Hong Kong’s digital asset rules and backed by U.S. Treasuries, has quickly become the world’s fourth-largest stablecoin by market capitalization.
Yet, there’s also recognition of Hong Kong’s limitations as a crypto hub. First, it’s a relatively small market with only 7 million people, and access to mainland China’s vast market remains off-limits—for now. Additionally, Hong Kong’s crypto policies prioritize investor protection, which could lead to higher compliance costs and deter founders seeking a more laissez-faire environment.
Nevertheless, Hong Kong remains one of the few jurisdictions that explicitly supports cryptocurrencies, alongside others like the UAE, Japan, and Singapore. As Jack Jia, head of crypto at global payments firm Unlimit, put it: “Any crypto regulatory framework Hong Kong introduces will be attractive from a reputational and image standpoint.”
Open-minded officials
In reality, Hong Kong’s crypto regulations aren’t the most lenient. Strict oversight of exchange operators prompted HashKey, Hong Kong’s flagship crypto representative, to apply for a license in Bermuda. None of the world’s largest crypto exchanges—Binance, Coinbase, or Kraken—are among the 22 applicants for Hong Kong’s virtual asset exchange licenses.
Hong Kong’s biggest appeal lies in its efforts to provide regulatory clarity for crypto activities.
“The SEC is notorious in the crypto industry. ‘Everything is a security, but we won’t tell you exactly what license you need—and then we might still reject your application,’” said Jia, describing the U.S. Securities and Exchange Commission’s approach to regulating crypto companies. “The SEC doesn’t have an established process, but Hong Kong regulators have set up channels to hear feedback.”
Indeed, several crypto executives told TechCrunch they’ve held private meetings with Hong Kong government representatives. Sergey Nazarov, co-founder of Chainlink, a San Francisco-based company dedicated to bringing real-world data into smart contracts (lines of code that execute predefined rules), said they’re currently discussing offering their technology to Hong Kong’s core financial infrastructure.
“People haven’t fully grasped how inherently compatible capital markets and crypto are. When I came to Hong Kong, I realized this compatibility will accelerate here first because the government and regulators are more open to it,” said Nazarov, who invited Hong Kong’s Financial Secretary Deputy Director Chen Yongzheng to join him for a fireside chat at Chainlink’s annual SmartCon conference in Barcelona last year.
This year, at the invitation of the Hong Kong government, Chainlink will bring SmartCon to Hong Kong, making it the first Asian city to host the event.
“Hong Kong regulators are overseeing stablecoins and crypto assets. That means Hong Kong can become a place where crypto assets and payments reliably operate within a regulated system,” Nazarov added. “That matters because without regulation, trillions of dollars in assets cannot move between banks.”
Steve Yun, president of the Dubai-based TON Foundation (Telegram’s official blockchain partner), is also optimistic, saying Hong Kong may hold the greatest competitive advantage compared to other aspiring crypto hubs because it “is trying to build a very comprehensive policy framework to create an environment more comfortable for builders and entrepreneurs, thereby attracting talent.”
Hong Kong’s financial regulations are complex, but Charles d'Haussy, CEO of the Switzerland-based dYdX Foundation, is no stranger to them—he previously served as head of fintech at InvestHK, the Hong Kong government’s foreign direct investment promotion agency.
“The Hong Kong government was very open-minded toward crypto early on,” recalled d'Haussy. Then, regulators tried to crack down on rampant crypto fraud, leading to a period of hostility. But “about a year ago, I think they realized there’s a new market emerging and that they should establish regulations so they don’t miss the opportunity.”
D'Haussy added: “Since then, you’ve seen the Hong Kong Monetary Authority (HKMA) roll out more CBDCs (central bank digital currencies), the Securities and Futures Commission (SFC) issue exchange licenses, and approve spot crypto ETFs.”
Gateway to China
When Hong Kong began embracing crypto last year, many speculated that mainland China would soon follow. However, since China continues to ban its citizens from trading cryptocurrencies, that hope remains distant. Still, businesses now recognize Hong Kong’s potential as a gateway to another valuable resource next door.
While Hong Kong attracts financial talent, Shenzhen—right next door—is home to some of the world’s largest tech giants, including Huawei, DJI, and Tencent. Unsurprisingly, crypto firms are leveraging Hong Kong’s favorable regulatory environment along with its proximity to developer talent in Shenzhen and other Chinese cities.
The TON Foundation is one player capitalizing on Hong Kong’s geographical advantage. To turn Telegram into a super app, TON is enabling developers to build lightweight blockchain-based applications that run directly within the messaging platform. At the Web3 Festival, the TON Foundation hosted a bootcamp in Hong Kong aimed at attracting Chinese developers, especially those experienced with WeChat mini-programs.
“Now, we’re trying to reach regions with large numbers of developers and entrepreneurs—especially those who grew up using some kind of mini-program within a super app, and those involved in building such ecosystems,” said Yun.
For instance, Aptos, backed by a16z, held a three-day hackathon in Shenzhen in February, drawing hundreds of applicants. Operated by a team formerly behind Meta’s Diem blockchain, Aptos is also collaborating with Alibaba’s cloud computing division to attract Chinese developers.
Some foreign founders have gone further by establishing physical operations in Hong Kong. zkMe, a company founded by a German entrepreneur focused on private credential verification, chose to base its headquarters in Hong Kong.
“We came here to build sustainable businesses and leverage technological advantages—clearly, collaboration with the Greater Bay Area is also highly beneficial,” said Alex Scheer, zkMe’s founder and CEO, referring to the initiative integrating Hong Kong with nine neighboring Chinese cities through incentives like tax breaks for Hong Kong companies setting up offices in Shenzhen. Fourteen of zkMe’s 16 team members are based in its Shenzhen office.
Some founders remain more optimistic that Hong Kong could pave the way for China’s eventual embrace of crypto. Anurag Arjun, founder of Avail, a modular blockchain company based in Dubai, believes governments that see the full benefits of crypto technology will ultimately adopt more inclusive stances.
“Over the past few years, the crypto industry has been developing very advanced technologies, such as zero-knowledge proofs,” he said, emphasizing that the underlying technology behind crypto wasn’t built to support fraudulent NFTs or speculative trading, but to strengthen foundational capabilities within the sector.
“Given Hong Kong’s strategic position, we see it as an important location that could serve as a gateway to China in the future,” Arjun said. “If China opens up to crypto—and once we start engaging more government officials and demonstrate that our technology applies beyond just monetary use cases—what we’re doing in Hong Kong will serve as valuable experience for expanding into the broader Chinese market.”
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