The Arrival of the Web3 Compliance Era and the Future Development of Exchanges

Hong Kong Actively Embraces Web3

Recently, a series of actions in the Web3 field in Hong Kong have attracted widespread attention in the industry. It is reported that the Hong Kong Securities and Futures Commission has received over 80 substantive operation reports, and it is expected that more than 130 virtual asset exchanges will apply for VASP licenses. Although Hong Kong's compliance policies are currently relatively lagging, its potential in the Web3 field should not be underestimated as an international financial center. Many exchanges are choosing to establish a presence in Hong Kong not only in the Web3 track but also with an eye on a broader financial landscape. The compliance track contains enormous potential, and if executed properly, it could even change the global landscape.

Limitations of Cryptocurrency Trading Models

Currently, there are two main modes of cryptocurrency trading: one is users trading with the order book on the exchange, which is fast but lacks bargaining power; the other is inquiry trading in social groups, which is flexible but carries credit risks. Industry insiders point out that the cryptocurrency trading field lacks tools similar to "over-the-counter trading platforms" in traditional finance. Considering the rapid development of Web3, relying solely on the order book trading model is clearly insufficient; it is also necessary to introduce a comprehensive inquiry trading model or replace insecure social group trading with a trustless approach.

Challenges Facing Web3 Financial Layout

Under the push of compliance policies in Hong Kong, many traditional financial institutions and practitioners have begun to lay out Web3 finance, but this is not an easy task. On one hand, traditional finance lacks understanding of virtual assets and needs time to learn; on the other hand, this field is full of uncertainty, and the return on investment is still unclear. Some Web3 exchanges are applying for VASP licenses, hoping to achieve synergy with traditional financial clients.

CeFi may become the bridge for traditional finance to enter Web3

For traditional financial investors in Hong Kong, DeFi presents a higher barrier to entry. In contrast, CeFi aligns more closely with their usage habits and has a lower threshold. Hong Kong has a large base of investors, and educating so many users on how to use wallets and assess asset security is a daunting task. Therefore, CeFi may become the preferred option for traditional financial investors to enter Web3.

However, wanting to engage in Compliance CeFi in Hong Kong also faces many challenges. Regulatory requirements require exchanges to self-custody customer assets and prohibit the use of third-party custody services, which places high demands on the exchange's technical level and compliance capabilities.

Contradictions and Challenges Facing Web3 Development

The Web3 industry currently faces a contradiction: projects that can make money in the short term often do not align with the goals of long-term builders. Many speculative projects can bring quick returns, but they contribute little to the long-term development of the industry. Builders who are genuinely working for the development of the industry may find it difficult to profit in the short term, which requires long-term capital support.

In a global interest rate hike environment, the Web3 industry faces the risk of capital exhaustion. To break through the current predicament, it is necessary to introduce new liquidity, testing the long-term cooperation ability of project parties and capital. Only with the combination of "timing, location, and harmony among people" can the industry truly advance.

Opportunities for Hong Kong in Web3 Development

As an important window for China to enter the global financial system, Hong Kong has unique advantages in the Web3 field. Digital currency may become a breakthrough point, and if the Hong Kong government can withstand pressure to promote relevant policies, it will be a tremendous victory. The Hong Kong market gathers professional and diligent talents, and with government support, it is expected to play a significant role in promoting the development of Web3.