In Web3 push, Hong Kong to spend US$6.4 million boosting industry with plans for virtual asset task force

The fresh funding this year will go towards activities including organising workshops and international seminars, Financial Secretary Paul Chan said
Hong Kong has ramped up efforts to bolster the digital economy, including new virtual asset regulations and support for artificial intelligence

Hong Kong budget 2023-24

Xinmei Shen

Published: 4:08pm, 22 Feb 2023

Why you can trust SCMP

The Hong Kong government is allocating HK$50 million (US$6.4 million) this year to boost the development of the Web3 industry while it is “in its start-up period”, in addition to setting up a virtual asset task force led by the city’s financial chief.

The money will go towards activities that include organising major international seminars and “workshops for young people” to aid the development of the Web3 ecosystem, Hong Kong Financial Secretary Paul Chan Mo-po revealed on Wednesday during his 2023-24 budget speech.

The funding will go through the government-run business park Cyberport, which set up the Web3Hub@Cyberport accelerator this year, the company said on the programme’s official WeChat account. The accelerator, co-founded by Legislative Council member Johnny Ng Kit-chong, told the Post last year that it aims to attract 1,000 Web3 start-ups to Hong Kong in the next three years.

“Every generation of technological reform brings about new applications and fresh opportunities, and even disrupts the mode of business operation,” Chan said in his speech. “The third-generation internet (Web3), currently in its start-up period, has the same huge potential.”

Hong Kong to allow retail investors to buy big-cap crypto tokens

Web3 is a loosely defined term that refers to a next-generation World Wide Web built on decentralised technologies such as blockchain. The most widely used Web3 applications to date have been cryptocurrencies and non-fungible tokens (NFTs), which the Hong Kong government has started to embrace while introducing more robust crypto regulations in a bid to become a virtual asset hub.

Chan said that he will establish and lead a task force on the development of virtual assets, which will field recommendations on industry development from members of relevant government bodies, regulators and market participants.

The task force will fall under the Digital Economy Development Committee (DEDC), according to people familiar with the matter. The DEDC, proposed by Chan last year during his 2022-23 budget speech, was officially set up last June under the Innovation, Technology and Industry Bureau (ITIB).

“We’re happy to see that the government will be establishing a task force on Web3,” said Marco Lim, managing partner at MaiCapital, a Hong Kong-based blockchain-focused hedge fund that was licensed last year to manage portfolios consisting only of virtual assets. “We hope the task force can coordinate with the two regulators on Web3-related matters, attract global Web3 companies to set up in Hong Kong and promote Hong Kong’s Web3 companies.”

Financial Secretary Paul Chan Mo-po delivers a speech on his 2023-24 budget at Legco Chamber, Admiralty, on February 22, 2023. Photo: SCMP / Sam Tsang

At the end of October, Hong Kong unveiled plans to bolster its standing in the virtual asset industry after an exodus of crypto firms in the preceding few years. The announcement came just weeks before the bankruptcy of FTX, once the world’s second-largest cryptocurrency exchange, that led to the collapse of multiple related companies and financial troubles for many others.

Since then, the government has unveiled regulatory measures for cryptocurrency firms, with new licensing requirements to go into effect in June. Retail investors will have the option of buying tokens with large market capitalisations, the Securities and Futures Commission proposed earlier this week.

Some Web3 companies in the city have already been trying to look beyond cryptocurrencies. Most notably, Animoca Brands became a giant in the Web3 metaverse space with its platform The Sandbox.

The government is also planning other measures to bolster the digital economy, particularly in the area of artificial intelligence, which has gained widespread attention in recent months amid hype around OpenAI’s ChatGPT bot. Chan said Hong Kong will conduct a feasibility study this year on developing an AI Supercomputing Centre.

“The Hong Kong government’s current focus on competing for global talent and developing innovation gives companies an excellent opportunity to strengthen their investment in artificial intelligence applications,” said Daniel Cham, general manager for Workday Greater China. “Properly planned and integrated, AI can deliver a workforce that is more relevant to future needs while also raising the organisation’s profile in the talent market.”

The government will also set aside HK$500 million for Cyberport to give out as subsidies to start-ups in need of digital transformation, according to Chan.

Post