Consensus 2025: The Evolution and Prospects of the Hong Kong Web3 Ecosystem

The Hong Kong Convention and Exhibition Centre welcomed nearly ten thousand participants, marking the first time the global Web3 industry's top summit, Consensus, has been held in Asia. Hong Kong, as a testing ground for financial innovation and a hub for the flow of values between the East and West, has become an ideal venue for this grand event. From green bond tokenization to the Hong Kong dollar stablecoin regulatory sandbox, from the tokenization ecosystem of physical assets to decentralized artificial intelligence, Hong Kong is driving the deep integration of Web3 from technological experimentation to real-world application through policy innovation.

1. Regulatory Framework: The Cornerstone of Web3 Ecosystem Development

Hong Kong is continuously improving its regulatory framework to lay the foundation for the safe and compliant development of the virtual asset ecosystem. By establishing a comprehensive regulatory framework that covers virtual asset exchanges, stablecoin issuers, custodial service providers, and over-the-counter trading activities, Hong Kong paves the way for value interoperability and long-term innovation in the financial market.

These measures have not only enhanced the credibility of Hong Kong's virtual asset market but also continuously attracted capital and enterprises. By the end of 2024, Hong Kong's Cyberport has gathered nearly 300 Web3 companies, with a total financing scale exceeding 400 million HKD.

However, the global Web3 landscape has undergone significant changes in the past two years. The regulatory environment in the United States has improved, and regions like Singapore and Dubai continue to send friendly signals. In this context, Hong Kong needs to place greater emphasis on integrating Web3 innovation into the real economy to maintain its competitive advantage.

Although the market share of crypto assets in the global financial system is less than 1%, their rapid expansion and increasing correlation with mainstream financial assets make their potential risks impossible to ignore. The regulatory goals of Hong Kong and the United States are actually aligned: to prevent financial risks that may arise from new types of assets while maintaining the vitality of innovation.

2. Hong Kong Dollar Stablecoin: Connecting Traditional Finance and the Crypto World

Stablecoins have become a hot topic at the Consensus conference and are a key area of ongoing focus and investment in Hong Kong in recent years. Several financial institutions are actively preparing to issue stablecoins pegged to the Hong Kong dollar, reflecting Hong Kong's determination to seize the initiative and capture future financial opportunities in the development of Web3.

Although US dollar stablecoins currently dominate the market, developing a Hong Kong dollar stablecoin is strategically significant for Hong Kong. It not only serves as a key link between traditional finance and the crypto world but may also become a widely accepted payment tool.

Through mechanisms innovation (such as interest-bearing stablecoins) and application innovation (such as tokenization of physical assets), the Hong Kong Dollar stablecoin is expected to avoid direct competition with the US Dollar stablecoin and attract a more diverse range of institutions and users to participate. At the same time, although there may be competition between the Hong Kong Dollar stablecoin and the digital Hong Kong Dollar in the short term, in the long run, they are expected to achieve resource sharing and complementary advantages.

III. Tokenization of Physical Assets: From Concept to a Hundred Billion Market

Asset tokenization (RWA) has become the hottest concept at this year's Consensus. Traditional financial giants generally believe that RWA tokenization is not just a trend, but an inevitability.

Hong Kong is actively embracing this trend. The 2024 Policy Address proposes promoting RWA tokenization and the construction of a digital currency ecosystem. The Hong Kong Monetary Authority has launched the "Digital Bond Financing Scheme" to encourage the capital market to adopt tokenization technology. The government is also considering promoting gold tokenization.

However, the dominance of the tokenization narrative is currently more in the hands of traditional financial institutions. Hong Kong needs more resource-rich and asset-holding institutions to actively participate in tokenization innovation in order to maintain its competitive edge globally. In the short term, Hong Kong should focus on standardized financial assets that are most suitable for tokenization and leverage its advantages as an international financial, trade, and shipping center, emphasizing the development of tokenization applications related to trade and cross-border activities.

4. ETF and Over-the-Counter Trading: Diversified Funding Channels

In 2024, Hong Kong launched a virtual asset spot ETF, providing investors with a new investment channel for cryptocurrency assets. By the end of the year, the total asset management scale of Bitcoin spot ETFs in Hong Kong had exceeded 3 billion HKD, accounting for 0.66% of the overall ETF market in Hong Kong.

The main advantages of the Hong Kong virtual asset spot ETF lie in supporting physical subscriptions and being the first to launch an Ethereum spot ETF. However, due to macroeconomic expectations, these advantages have not led to sustained incremental growth. The Ethereum ETF has affected investor enthusiasm due to its lack of support for staking.

In addition to ETFs, Hong Kong has also formed a three-tiered funding network of "licensed exchanges-compliant over-the-counter trading-banks." The over-the-counter trading market is becoming an important hub for cryptocurrency liquidity, handling transaction volumes of nearly tens of billions of dollars each year. The unique cryptocurrency exchange shops not only attract young investors from around the world but are also appealing to participants in the middle-aged and older demographics.

Regulators are considering bringing over-the-counter trading under regulatory oversight. While this may impact trading activity in the short term, in the long run, it helps attract more compliant capital and provides another channel for the free flow of funds in Hong Kong. In the future, a safe and compliant over-the-counter trading market could not only improve the liquidity of the Hong Kong market but also become an important link between the cryptocurrency market and the real economy.