Consensus 2025 Review: Policy Innovation and Ecological Evolution of Web3 in Hong Kong

Nearly ten thousand industry professionals gathered at the Hong Kong Convention and Exhibition Centre to participate in the global Web3 industry's top summit, Consensus, held for the first time in Asia. Hong Kong, as a testing ground for financial innovation and a hub for the flow of values between the East and the West, has become an ideal location for this grand event. From the tokenization of green bonds to the regulatory sandbox for HKD stablecoins, from the on-chain ecosystem of physical assets to decentralized artificial intelligence, Hong Kong is driving the concept of Web3 from a purely technological experiment towards a deep integration with the real world through innovative policies.

I. Regulatory First: Exploring the Compliance Boundaries of Web3

The cornerstone of Hong Kong's Web3 ecosystem is a reliable and applicable regulatory framework. Since the release of the policy declaration at the end of 2022, Hong Kong has continuously improved its regulatory system to promote the autonomous development of the virtual asset ecosystem within compliance boundaries. By establishing a comprehensive regulatory framework covering virtual asset exchanges, stablecoin issuers, custodial service providers, and over-the-counter trading activities, Hong Kong has laid the foundation for value interconnectivity and long-term innovation in the financial market.

These measures not only enhance the credibility of Hong Kong's virtual asset market but also continuously attract capital and businesses. By the end of 2024, Hong Kong's Cyberport alone has gathered nearly 300 Web3 companies, accumulating a financing scale of over 400 million HKD.

However, the global Web3 landscape has undergone significant changes in the past two years. The regulatory environment for cryptocurrencies in the United States has clearly improved, and regions such as Singapore and Dubai continue to send friendly signals. Against the backdrop of increasingly fierce global Web3 competition, Hong Kong needs to reposition its advantages. In her speech at the conference, the CEO of the Hong Kong Securities and Futures Commission, Ashley Alder, pointed out that "the second trend shaping the future financial landscape is integrating Web3 innovations into the real economy."

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 have made their risks impossible to ignore. The regulatory approaches of Hong Kong and the United States often seem different, but in fact, they converge: both aim to maintain innovative vitality while preventing the potential financial risks posed by these emerging assets.

2. Hong Kong Dollar Stablecoin: Hong Kong's Financial Ambition

Stablecoins are a hot topic at this conference and have been a key area of ongoing interest and investment in Hong Kong over the past two years. Several financial institutions are preparing to apply for the issuance of stablecoins pegged to the Hong Kong dollar under the new regulatory framework.

Although it is difficult to predict how much market share the Hong Kong dollar stablecoin can occupy in the current US dollar-dominated market, developing a Hong Kong dollar stablecoin is an inevitable choice for Hong Kong to seize the initiative in the development of Web3 and capture future financial opportunities. Stablecoins are not only the infrastructure for building a connection between fiat currency and cryptocurrency assets, but also the core link connecting traditional finance and the crypto world, with the potential to become a widely accepted payment tool.

Of course, we also need to distinguish between Hong Kong dollar stablecoins and digital Hong Kong dollars. Although there may be potential competition between the two in the short term, there is hope for resource sharing and complementary advantages in the future: the application scope and scalability of Hong Kong dollar stablecoins in the virtual asset market will far surpass that of digital Hong Kong dollars, while digital Hong Kong dollars will lead in terms of value support and reliability.

III. Tokenization of Physical Assets: From Concept to the Billion-Dollar Market Split

The tokenization of physical assets is undoubtedly the hottest concept at this conference. Traditional financial giants generally believe that "the tokenization of physical assets is not a trend, but an inevitability." This reveals the strategic shift of current financial institutions.

Hong Kong has been actively embracing the wave of tokenization of physical assets. The 2024 policy address proposed to promote the tokenization of physical assets and the construction of a digital currency ecosystem. The Hong Kong Monetary Authority launched the "Digital Bond Financing Scheme" to encourage the capital market to adopt tokenization technology. During the conference, the Secretary for Financial Services and the Treasury, Christopher Hui, also stated that Hong Kong is considering promoting gold tokenization.

However, at this stage, the dominance of tokenization does not lie within the Web3 domain, but rather depends more on whether traditional institutions have sufficient motivation to change the status quo by bringing their assets on-chain and tokenizing them. This is not an easy task for traditional institutions, as the application of new technologies often requires high costs, and the incremental value created in the short term may not be significant. As Wall Street in the United States accelerates its layout in the tokenization market, Hong Kong urgently needs more resource-rich and asset-holding institutions to actively participate in innovation in order to take the initiative in this transformation. How to stimulate market vitality remains an important proposition.

4. ETF and Over-the-Counter Trading: The Battle of Capital Channels

Another key initiative for the development of Web3 in Hong Kong in 2024 is the launch of virtual asset spot ETFs. From the end of 2023, when relevant applications were clearly accepted, to the official listing of six virtual asset spot ETFs on the Hong Kong Stock Exchange by the end of April 2024, it took just over a hundred days, fully reflecting the efficiency of Hong Kong's regulatory authorities. By the end of 2024, the total assets under management of Bitcoin spot ETFs in Hong Kong have exceeded 3 billion HKD, accounting for 0.66% of the overall Hong Kong ETF market.

Compared to the United States, the main advantages of the Hong Kong virtual asset spot ETF lie in supporting physical subscription and redemption and being the first to launch an Ethereum spot ETF. However, these have not led to sustained incremental growth. Although the shares of the ETF for physical subscription accounted for more than 50% of the initial issuance scale, Bitcoin holders are reluctant to easily release their liquidity due to macro expectations, while the Ethereum spot ETF has affected investor enthusiasm due to the lack of support for staking.

In addition to the ETF channel, Hong Kong has gradually formed a three-tier funding network of "licensed exchanges - compliant over-the-counter trading - banks." Currently, the over-the-counter trading market in Hong Kong handles a transaction volume of nearly tens of billions of dollars annually. At the same time, thanks to the cryptocurrency exchange shops, which are a regionally distinctive physical product, it not only attracts young investors from around the world but is also appealing to participants in the middle to older age brackets. In recent years, the Hong Kong over-the-counter trading market has also attracted the attention of numerous users and institutions in international trade and cross-border payment sectors, becoming another important channel for gathering global funds in Hong Kong.

The Hong Kong government is considering bringing over-the-counter trading under regulatory oversight. Although this might impact trading activity in the short term, in the long run, it can help Hong Kong attract more compliant capital inflows and provide an additional channel for the free flow of funds outside of licensed virtual asset trading platforms. In the future, a secure and compliant over-the-counter trading market could not only help improve liquidity in the Hong Kong market but may also become an important channel connecting the crypto market and Web3 ecosystem to the real liquidity market.