As U.S. regulators continue to tighten scrutiny on cryptocurrencies, startups and founders in the field are looking for friendlier overseas environments to support their development.
Hong Kong is one of those places, actively seeking to restore its status as a financial center, aiming to attract a new batch of entrepreneurs, tech experts, and investors through favorable cryptocurrency regulations. So far, its strategy seems to be working.
In mid-April, Hong Kong's annual Web3 Carnival attracted over 50,000 participants. Compared to last year, there was a noticeable increase in non-Chinese participants. The atmosphere felt like a gathering of cryptocurrency refugees escaping the restrictive policies of mainland China, and during this year’s event, officials in Hong Kong seriously listened to the speeches of founders, who appeared disheveled and were battling jet lag.
Although billionaire founder Cathie Wood of Ark Invest did not attend the event in person, she delivered a speech via video, and Ethereum's 'nomadic' founder Vitalik Buterin also made a surprise appearance at the event.
This feels familiar: In the early stages of the cryptocurrency industry, Hong Kong was a major center for cryptocurrency companies run by foreign entrepreneurs, including FTX, Crypto.com, and BitMex. Like other jurisdictions around the world, as market volatility spiraled out of control, Hong Kong cracked down on cryptocurrency activities to protect investors.
In June last year, the Hong Kong government legalized cryptocurrency trading for retail investors, reigniting enthusiasm in Hong Kong's Web3 space. Since then, Hong Kong has implemented a series of measures to regulate cryptocurrency-related activities, including a stablecoin issuance sandbox and a licensing system for cryptocurrency exchange operators. Hong Kong has followed in the footsteps of the U.S. by also listing a number of cryptocurrency exchange-traded funds.
These initiatives stand in stark contrast to the U.S. government's tough stance on cryptocurrency companies. Participants of the Web3 Carnival from the U.S., Europe, the Middle East, India, and beyond are optimistic about Hong Kong's momentum. For example, FDUSD from First Digital was issued under Hong Kong's digital asset regulations and is backed by U.S. Treasury bonds, quickly becoming the fourth largest stablecoin in the world by market capitalization.
At the same time, people also recognize the limitations of Hong Kong as a cryptocurrency center. First, Hong Kong is a relatively small market with a population of only 7 million, while the massive market of mainland China is currently inaccessible. Additionally, the rules prioritize investor protection, which may lead to higher compliance costs and hinder those inclined towards a freer environment.
Nevertheless, Hong Kong remains one of the few jurisdictions that explicitly supports cryptocurrency, with several other countries, including the UAE, Japan, and Singapore. As Jack Jia, head of cryptocurrency at global payment company Unlimit, stated: "Any cryptocurrency regulatory legislation from Hong Kong will attract everyone from a reputation and image perspective."
Open-minded officials
Hong Kong's cryptocurrency regulation is not the most lenient. In fact, Hong Kong's strict scrutiny of exchange operators has led its cryptocurrency representative firm, HashKey, to seek licenses in Bermuda. The world's largest cryptocurrency exchanges, Binance, Coinbase, and Kraken, have not appeared on the list of 22 applicants for virtual asset exchange licenses in Hong Kong.
It has been proven that Hong Kong's biggest attraction lies in its efforts to provide regulatory clarity for crypto activities.
"The SEC is notorious for saying everything is a security, but we won't explicitly tell you what license you need to apply for, and then we might still reject your application," Jia said, describing the SEC's attitude towards regulating cryptocurrency companies. "The SEC has no established process, but the Hong Kong regulators have already set up a consultation process."
In fact, several cryptocurrency executives have told TechCrunch that they have held closed-door meetings with representatives of the Hong Kong government. Sergey Nazarov, co-founder of San Francisco-based Chainlink, expressed that the company is committed to inputting real-world data into smart contracts (lines of code that execute predefined rules) and is currently discussing providing its technology to Hong Kong's major financial infrastructure.
"People don't fully realize that capital markets and cryptocurrencies are very compatible. After coming to Hong Kong, I've found that this compatibility will accelerate here first because the government and regulators are more open to it," Nazarov said, inviting Hong Kong's Deputy Secretary for Financial Services and the Treasury, Chan Yong-chung, to a fireside chat with him at the Chainlink annual conference SmartCon held in Barcelona last year.
Nazarov stated that this year, Chainlink has been invited by the Hong Kong government to bring SmartCon to Hong Kong, making it the first Asian city to host this conference.
"Hong Kong regulators are regulating stablecoins and digital assets, which means Hong Kong has the potential to be a place where assets and payments can reliably operate within a regulated system," Nazarov added. "This is important because without regulation, trillions of dollars and banks cannot transfer."
Steve Yun, president of the Dubai-based TON Foundation (Telegram's official blockchain partner), also holds an optimistic view, stating that compared to other aspiring cryptocurrency centers, Hong Kong may have the greatest competitive advantage as it "is trying to build a very comprehensive framework that makes developers and entrepreneurs feel more comfortable and attract talent."
Hong Kong's financial regulation is quite complex, but Charles d'Haussy, CEO of the Swiss dYdX Foundation, is no stranger to these regulations, having previously served as the head of fintech promotion at the Hong Kong government's foreign direct investment department.
"The Hong Kong government was very open to cryptocurrencies in the early stages," d'Haussy recalled. Subsequently, regulators attempted to crack down on rampant cryptocurrency fraud, leading to a period of hostility. However, "about a year ago, I think they realized there is a new market there, and regulations should be formulated to ensure we do not miss this opportunity."
d'Haussy added: "At that time, you will see the Hong Kong Monetary Authority (HKMA) introduce more and more CBDCs (Central Bank Digital Currencies), and the Hong Kong Securities and Futures Commission (SFC) will issue licenses for cryptocurrency exchanges and ETFs."
Enter China
When Hong Kong opened up to cryptocurrencies last year, there was widespread speculation that mainland China might follow suit. However, due to China's continued ban on its citizens trading cryptocurrencies, that hope remains distant. Nonetheless, businesses are now recognizing Hong Kong's potential as a gateway to another valuable resource for its neighboring country.
While Hong Kong attracts many financial talents, its southern neighbor Shenzhen is home to global tech giants like Huawei, DJI, and Tencent. Undoubtedly, cryptocurrency companies are taking advantage of Hong Kong's friendly regulatory environment and the convenience of developer resources from Shenzhen and other Chinese cities.
The TON Foundation is a participant leveraging Hong Kong's geographical position. Telegram is collaborating with TON to become a super application, allowing developers to build lightweight applications based on blockchain and run them on this messaging tool. During the Web3 Carnival week, the foundation hosted a boot camp in Hong Kong to attract Chinese developers, especially those familiar with the WeChat mini-program empire.
"Currently, we are reaching out to areas with a large number of developers and entrepreneurs, especially those who have grown through super applications using some mini-programs, as well as those involved in the growth of this ecosystem," said Yun.
For example, Aptos, supported by a16z, held a three-day hackathon in Shenzhen in February, attracting hundreds of applicants. Aptos is operated by a team that previously worked on the Diem blockchain at Meta and collaborated with Alibaba's cloud computing department to attract Chinese developers.
Some foreign founders have gone a step further by establishing physical institutions in Hong Kong. zkMe is a company founded by German entrepreneurs aimed at achieving private certificate verification, and it has chosen to set up its headquarters in Hong Kong.
"We are here to build a sustainable business and leverage the technological expertise here. Clearly, cooperation with the Greater Bay Area is also very beneficial," said Alex Scheer, founder and CEO of zkMe, referring to the plan aimed at integrating Hong Kong with nine neighboring Chinese cities through tax incentives and other policies. These policies include tax incentives for Hong Kong companies set up in Shenzhen, with 14 of zkMe's 16 team members coming from the Shenzhen office.
Some founders are more optimistic about Hong Kong paving the way for China to embrace cryptocurrency in the future. Anurag Arjun, founder of Dubai-based modular blockchain company Avail, believes that governments that see the full benefits of cryptocurrency technology will ultimately adopt a more inclusive stance.
"In recent years, the crypto industry has been developing very advanced technologies, such as zero-knowledge proof technology." He stated that the underlying technology behind cryptocurrencies was not developed to support fraudulent NFTs or speculative trading, but to enhance the foundational technology of the industry.
"Given Hong Kong's strategic nature, we see it as an important place - the future is a gateway to China," Arjun said. "If China opens up in the future - once we talk to more government officials and prove our technology is not only applicable to currency elements - what we do in Hong Kong will provide valuable experience for expansion into China."
2025 Hong Kong Web3 Carnival Event Preview
The Hong Kong Web3 Carnival is a Web3 event brand jointly launched by Wanxiang Blockchain Lab and HashKey Group, hosted by W3ME. The 2025 Hong Kong Web3 Carnival will be held from April 6 to 9, 2025, at the Hong Kong Convention and Exhibition Centre, Hall 5 BCDE, lasting four days with over 14,000 square meters of exhibition space.
Previous events, including the 2023 Hong Kong Web3 Carnival and the 2024 Hong Kong Web3 Carnival, gathered over 250 cutting-edge exhibiting projects, invited over 800 industry leaders for in-depth exchanges, and attracted more than 80,000 on-site attendees, along with over 300 diverse related activities.
Financial Secretary of the Hong Kong Special Administrative Region, Paul Chan, Ethereum co-founder Vitalik Buterin, ARK Invest CEO and CIO Cathie Wood, among others, have all served as keynote speakers at events.
As the third consecutive event, building on the reputation and global influence of the previous two sessions, the 2025 Hong Kong Web3 Carnival is expected to attract tens of thousands of people, continuing to gather global elites and cutting-edge projects in the Web3 field to explore the infinite possibilities of Web3 technology, bringing an unprecedented technological feast to global attendees. What are you waiting for? Come join us!
Ticket Discounts
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The 2025 Hong Kong Web3 Carnival is grandly scheduled to be held next April.
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