Hong Kong ‘ready’ to capitalize on crypto’s next bull run: Hashkey Capital

Hashkey Capital partner of liquids funds and research, Jupiter Zheng, says the crypto sector in Hong Kong is now primed for significant growth over the next four to five years.

Hong Kong is “very ready” for the next wave of mass crypto adoption, with an influx of crypto talent that has been spilling into the aspiring digital asset hub, says Jupiter Zheng, a partner at Hashkey Capital.

Speaking to Cointelegraph, Zheng, partner of liquid funds and research at the investment arm of Hong Kong crypto firm HashKey Group — explained that the combination of new Web3 projects along with crypto-positive regulatory developments has primed Hong Kong for significant growth in the next four to five years.

“You’ve got all of these new, different projects, with their founders and teams here, which is all real GDP by the way. These teams are already boosting both banking and capital market activities."

Zheng added that while crypto prices haven’t reflected it, the level of sophistication being developed in the sector over the past 18 months had been striking.

“The actual technological improvement we’ve seen throughout the bear market has been quite astonishing. So I think from the technology side, we are very ready for the next wave of larger mass adoption in the crypto world,” said Zheng.

The reason for his bullishness for the region was based on h belief that the Hong Kong government is in dire need of a new economic driver, something that Zheng believes the crypto sector is ready to offer.

“The GDP in Hong Kong in recent years hasn’t been looking so good — largely due to Covid. So it needs a new driver,” Zheng said. “So it’s my theory that crypto and Web3 are the new drivers here.”

@mar2424 Jupiter Zheng, HashKey Capital's Partner of Liquid Funds and Research, spoke at a panel discussion at CVCF last week with the theme "Navigating the Web3 Investment Landscape: Emerging Trends to Watch in 2023–24". pic.twitter.com/P5Yg1StzfI
— HashKey Capital (@HashKey_Capital) November 6, 2023

On Aug. 3 this year, Hashkey became the first crypto exchange in Hong Kong to receive a specific license that allowed them to offer crypto assets to retail investors.

Zheng admitted that while he’s not directly involved in the exchange arm of Hashkey, he expects the demand for crypto products from local Hong Kong residents to grow as the government continues to shore up investor concerns by outlining its regulatory scheme for the sector.

“The recent policy changes give retail investors safety because now you’ve got insurance legal protections,” he said.

“You don't have to use online wallets to do self-custody. All you need to do is open an account on an exchange, and then you can use your Hong Kong dollars to buy Bitcoins and other crypto. It's quite easy.”

“For now it's still a bear market, but when the bull market comes back, we can assume that people’s outlook will change quickly. Retail will definitely be coming back, especially when they have a lot of opportunities to buy securely with licensed exchanges.”

Overall, Zheng predicts that Web3 in Asia and Hong Kong will witness a similar pattern of development to that of the GameFi sector in South East Asia in 2021, which saw Axie Infinity briefly become one of the most-played games in the world.

In Zheng’s view, while Axie was prone to massive speculation, the underlying model of development would be similar — projects that are developed in the U.S. and Europe could easily find a welcoming market in Asia.

“I think in the future Asia will still follow the same pattern. Protocols and infrastructure projects that are developed in the United States or Europe or Australia may not witness massive adoption where they’re developed — but if they want to find a market they can go to Asia.”

Zheng conceded that while growth will be less feverish than once seen in South East Asia, there’ll be more of a sober and well-regulated focus on protocols and blockchain infrastructure instead of rampant speculation on gaming.

Hong Kong's burgeoning virtual asset policy is paving the way for the future of #Web3

Our Partner of Liquid Funds and Research, @mar2424 shares his insights into the developments and opportunities that are reshaping the industry and the rest of the world at large.

Read more:
— HashKey Capital (@HashKey_Capital) November 7, 2023

It’s worth noting that Hong Kong was rocked by a crypto exchange scandal in September, in which an unlicensed exchange called JPEX allegedly swindled investors out of some $165 million. The fallout has since been described as the one of the worst financial crises to have ever hit the region.

Despite the debacle, Hong Kong’s secretary for financial services and the treasury Christian Hui assured a crowd of investors, government officials and other regulators at HK Fintech week that the JPEX drama hadn’t affected the government’s aspirations to turn Hong Kong into Asia’s crypto hub.

Hong Kong also pledged to tighten its crypto regulations after JPEX’s alleged actions. The SFC also set up a task force with the police to deal with illicit crypto exchange activities and updated its policies on crypto sales and requirements.

Asia Express: Chinese police vs. Web3, blockchain centralization continues

<div>Anchorage co-founder sees 'tons of opportunity' as it expands into Asia</div>

Anchorage Digital

Anchorage Digital has marked its plans for expansion into the Asian crypto market, with co-founder Diogo Mónica noting that Singapore is just a starting point.

Anchorage Digital co-founder and president Diogo Mónica believe there is immense opportunity in Asia’s institutional investors, with the digital asset infrastructure provider on Oct. 5 announcing a “major expansion” of its platform into the region.

Speaking to Cointelegraph, Mónica said the company chose Singapore as a “jump point” into the wider Asia market as the country has become a hub for crypto companies and has a strong regulatory environment. Anchorage is currently undertaking the application process with the Monetary Authority of Singapore (MAS), the city-state's central bank.

“It’s about being in a regime that’s friendly towards crypto and that businesses want to do business in. We’re institutional only, institutions are going to Singapore, so we're following suit.”

However, Mónica said he sees “tons of opportunity” in the Thai, Indonesian, Japanese and South Korean crypto markets as well, after speaking to regulators there, though he expects the company will need a more local presence.

“Right now our strategy is being regulated in Singapore as it’s recognized by all the other regulators as a great location,” Mónica says, adding other regulators in the region have “very strict, but very clear rules, which is amazing.”

Anchorage provides infrastructure for use by financial institutions to enable digital asset custody, exchange, staking and other Web3-related services.

Mónica said however that Asian institutional investors have changed their tune on how they approached crypto investments after the wake of the Terra ecosystem collapse.

He said it was rarer for Asia-based institutions to care about the security of the assets up until recently, with a tendency of focusing more on product features. However, in the wake of the collapse and the resulting sluggish crypto market, the focus has shifted to regulation, risk management and business continuity.

“I now have conversations about bankruptcy, and whether their assets are bankruptcy remote, and whether they're on your balance sheet […] but a year ago, nobody's asking me questions about bankruptcy. A year ago, everybody was asking me questions about DeFi and things like that.”

Mónica says Anchorage already has a team in Singapore with clients from the region making up roughly 10% of its business. He sees that expanding to 25% over the next 12 to 18 months.

He said the bear market is a good time to gain a foothold and build relationships with regulators as it demonstrates its ability to attract well-established clients who “are not just tourists to the space.”

“You're seen as the leader, and you're seen as the people that expanded and have conviction, even during the bear market.”

The most popular use case for crypto that Mónica is witnessing in the region is cross-border remittances and borrowing and lending. He also mentioned mining is a common use case, not just for Bitcoin (BTC) but also companies running proof-of-stake validators.

As for the future, he says announcements of “some very large traditional firms” using its technology to offer services themselves are on the horizon, along with a focus on stablecoins and the infrastructure component which will serve use cases for those assets.

asia crypto market