Interview with HashKey Group COO: Hong Kong Encryption New Deal - Opportunity or Challenge?
Livio Weng,The nickname "Qi Ye" in the industry, joined HashKey Group as Chief Operating Officer (COO) in April this year. As one of the only two licensed trading platforms in Hong Kong, HashKey PRO, a subsidiary of HashKeyGroup, has communicated with the Securities Regulatory Commission and expanded its retail business license immediately after the implementation of the Hong Kong Encryption New Deal.
The content of the interview is as follows:
1. What does the Hong Kong virtual asset VASP licensing system mean? What profound impact will it have on Hong Kong and the global encryption market?
After a round of industry thunderstorms, investors are eager for the market to be standardized and transparent, and it is imminent to increase public confidence in this market. The VASP licensing system also provides a possibility for other countries around the world to explore the regulation of virtual asset services. The new system is leading in the Greater East Asia region, and has also formed a first-mover advantage in the global financial market, because it can effectively provide virtual asset investors with higher security and transparency guarantees.
The layout and development of the Web3 industry in Hong Kong will have a major impact on Hong Kong, Asia and the world. As one of the four major financial centers in the world, Hong Kong has clearly put forward regulatory requirements for the first time and issued licenses to compliance practitioners. Of course, there are some regulatory measures in other markets, such as MSB and MTL in the United States, and corresponding regulatory measures in Singapore and Japan. However, what makes Hong Kong special is its influence on the industry and its huge market potential, which makes it a globally recognized leading standard. For a long time, Asia and North America have been the two growth poles of cryptocurrency in the world. After the establishment of the new license system in Hong Kong, we will have the honor to witness the curtain of the encryption world rising from east to west in Hong Kong.
In the future, the core of the Hong Kong model is compliant and secure transactions. Only with the rise of licensed exchanges in Hong Kong can the Asian encryption market rise. With the entry of Asian mainstream financial institutions and outside retail investors, high-quality project assets and projects in the next round of bull market will only obtain good market performance through licensed exchanges. Of course, the market is still in the preheating stage, which is also the reason for the recent downturn. The logic behind it is that the current concept of Hong Kong is still in the conceptual stage and has not yet been fully implemented. We expect the actual landing of the first wave of value to appear around the third quarter.
2. This licensing is mainly for retail business. What is the core difference between HashKeyPRO and other virtual asset trading platforms?
Fund security has always been the most concerned issue for investors. In the past few years, due to the lack of unified and effective regulatory standards and mechanisms, there have been many problems and risks in virtual asset trading platforms, such as fraud, money laundering, hacker attacks, and user fund security. These problems not only damage the interests of investors, but also hinder the healthy development of the Web3 industry.
Therefore, the advantage of licensed exchanges is that they set very high standards for the protection of user assets by compliance regulations, so as to avoid the previous continuous industry thunderstorms. And trust will not be all right just because the trading platform simply holds a license. Users will spare no effort in our trust building in terms of security and compliance. The main body of HashKey PRO is continuously audited by the Big Four accounting firms for reserve certificates. We are able to store client funds in isolation and have a complete third-party insurance protection system.
From the perspective of product architecture, HashKey PRO has been designing and developing the system according to the structure of licensed exchanges from the beginning of the project, that is, native compliance, rather than transformation based on non-compliant platforms. The key points include a series of in-depth protection measures for user assets, as well as a complete set of virtual asset risk control assessment and grading system, to ensure that different types of users can obtain transaction services with corresponding risks.
As one of the only two licensed trading platforms in Hong Kong, it has previously held No. 1 and No. 7 licenses and served institutional customers. Compared with applying for licenses from scratch, already licensed exchanges can apply for extension of existing licenses through simplified procedures. We have complied with most of the regulatory requirements in the past, and the latest updated guidance mainly involves some detailed adjustments.
4. After the regulatory framework is clarified, the virtual asset industry will develop from an alternative innovative asset to a mainstream asset class. What do you think are the pain points that need to be solved urgently?
With the development of the virtual asset industry transforming into a mainstream asset class, the fiat currency channel has become a bridge connecting real financial assets and virtual assets, playing an important role. In order to realize the large-scale application of virtual assets and move towards the mainstream, the fiat currency channel is regarded as an important infrastructure connecting the Web2 society and industry to Web3. Whether it is distributed ledgers, smart contracts or the recent popular RWA (Real-World Assets), the application scope of virtual assets is becoming wider and wider, and the technical linkage is getting deeper and deeper, and the core is still legal currency. The stability and development of fiat currency channels are crucial to the successful application of virtual assets.
Recently, some cryptocurrency-friendly banks, such as Silvergate Bank and Signature Bank, have closed down one after another, and the global fiat currency deposit and withdrawal channels are facing pressure and tightening, which poses certain challenges to the development of the virtual asset industry. For fiat on-ramps, we have seen a gradual reversal of the trend in Hong Kong.
In cooperation with legal currency channels, licensed institutions such as HashKey PRO, benefiting from the special status of the license, can better promote the interaction and flow between legal currency and virtual assets.
Our compliance advantages have allowed HashKey PRO to take the lead in developing fiat currency channel cooperation, and have now completed docking with some mainstream banks. With the implementation of the Hong Kong policy, it is expected that more banks will cooperate with licensed exchanges represented by HashKey. This will be a great benefit for ordinary users who are looking forward to entering the market, because they can directly conduct deposit and withdrawal operations through banks, which greatly reduces the threshold for participating in virtual asset activities.
I believe that this will be a major turning point in the future of the encryption industry. With the landing of the Hong Kong license, more and more banks will be able to connect with the exchange, providing more convenient channels for ordinary people to enter and exit funds. The last round of bull market mainly benefited from the loose policy of the United States and the participation of some star companies, which provided new channels and attracted a large amount of capital to enter the market. The clarification of Hong Kong’s regulatory framework this time will promote more people to participate in the cryptocurrency market, bringing new capital inflows to the industry, and with the rotation of the economic cycle, it will give birth to the next round of bull market.
5. HashKey Group previously announced that it will launch HashKey PRO in the second quarter. When will it be launched?
HashKey PRO, as one of the two exchanges that previously held No. 1 and No. 7 licenses, will apply for a simple process to apply for additional VASP licenses. At present, the application is being submitted to the Hong Kong Securities Regulatory Commission in accordance with the requirements of the simple process, and it is planned to complete the license extension in the next period of time, so that its business targets cover individual investors.
After submitting the license application, HashKey PRO also needs to further implement the revised virtual asset trading platform guidelines issued by the Hong Kong Securities Regulatory Commission. Because the preliminary work is relatively sufficient and perfect, only some fine-tuning is needed in the follow-up.
At present, we are in the testing and warm-up stage before the official exhibition for retail investors. After the official virtual asset trading platform guidelines are released, we will quickly complete the corresponding system adjustments and open the retail business. We will maintain close communication with regulators to ensure that our system operates in compliance with regulatory requirements. We will also continue to refine our products to provide investors with a safe, convenient and reliable trading experience.
