When the Hong Kong blockchain conference kicked off, Lan Kwai Fong regained its prosperous scene of a few years ago.
01. Traditional finance is in trouble
In recent years, people in the crypto industry have known that Hong Kong is gradually embracing crypto technology. However, what many people may not know is that the development of Hong Kong's traditional financial sector has not been smooth in recent years.
According to data released by the Hong Kong Stock Exchange, the scale of initial public offerings (IPOs) on the Hong Kong Stock Exchange this year was just over HK$100 billion.
Perhaps this year, the scale of initial coin offerings (ICOs) of Hong Kong crypto projects may exceed that of IPOs.
Some people believe that the environment in Hong Kong has changed in recent years. External factors include the withdrawal of European and American capital and sanctions against Hong Kong. Of course, there are also internal reasons.
However, the advantage of the crypto industry is that you can develop as long as you want. Unlike the barbaric behavior of some places forcibly arresting people or interfering with cryptocurrencies, the crypto industry does not have high requirements for the external environment:
- The team is distributed and does not have many requirements for the office environment.
- Most payments are made through cryptocurrencies, without the need to rely on support from traditional financial institutions.
- In terms of regulation, most decentralized projects operate under a compliance framework. Real scams mostly appear in centralized projects.
02. Hong Kong government is running out of funds
Affected by various factors, the Hong Kong SAR government is also facing financial pressure and has been depleting its fiscal reserves in recent years.
Unlike the Chinese/US governments, which can finance their deficits by printing money, the Hong Kong government can only finance its deficits by earning US dollars while maintaining the HKD-USD peg.
At present, the Hong Kong government's fiscal reserves still amount to more than 600 billion Hong Kong dollars, but this has been greatly reduced compared to the peak period. At the current consumption rate, the fiscal reserves may only last for 2 to 3 years.
03. Other industries are in trouble
Hong Kong's retail industry is also facing severe shrinkage. On weekends, Hong Kong people flock to Shenzhen for shopping, and Sam's Club is crowded with Hong Kong people.
Mainland tourists no longer frequently visit Hong Kong because prices there are high and service is poor, while Southeast Asia is more convenient.
Apart from the crypto industry, I am not very willing to go to Hong Kong. Hong Kong's foreign trade is also facing difficulties, because Hong Kong itself has no manufacturing industry, and most of its foreign trade relies on re-export trade from the mainland.
Hong Kong's real estate industry is also facing difficulties:
04. Crypto becomes an option in Hong Kong
Hong Kong has little choice but to invest in the crypto industry. However, it is unclear whether the crypto industry can provide financial support to the Hong Kong government in the short term and make up for the losses in other industries.
At present, most projects just hang a sign in Hong Kong, then raise funds in Hong Kong, and eventually go to large exchanges.
Currently, the biggest move by the Hong Kong government is to issue licenses to several exchanges. However, global crypto investors do not recognize the Hong Kong government licenses very much, and the liquidity of these licensed exchanges is also very low.
With the rapid development of dex exchanges, the dex trading volume supported by mainstream public chains is stronger than that of many centralized exchanges. In this case, it is obviously not a wise move to rely on a local license to support centralized exchanges.
My personal suggestion is that the Hong Kong government should focus on maintaining the linked exchange rate system between the Hong Kong dollar and the US dollar, and leave other issues to the market to resolve as much as possible.