Author: Mankiw Brand Department

Opening words

Startup Web3, chat every Wednesday!

"Startup Web3.0" is an interview program for Chinese Web3.0 entrepreneurs initiated by Mankiw LLP. Every Wednesday night, we will invite industry leaders, first-line institutions, well-known entrepreneurs, etc. to share their views. We hope to promote the compliance development of China's Web3.0 industry through positive voices, rational discussions, and experience sharing.

Web3 is constantly changing. How can Hong Kong seize the global high ground by taking advantage of the policy? In this issue of "Startup Web3.0", Lawyer Niu Xiaojing of Manquin Law Firm talks with Alma, CEO of Techub News, with the theme of "Opportunities and Challenges of Hong Kong's Web3 Industry", bringing exclusive insights into Hong Kong's Web3 ecosystem.

From entering the industry in 2017 to building a Web3 media based in Hong Kong, Alma has traveled around the world and interviewed countless bigwigs. She has witnessed the ups and downs of the industry, experienced the innovation bottlenecks and the on-chain boom of the carnival, and sounded the alarm for compliance with 8 years of deep cultivation: With the support of policies, Hong Kong has unlimited opportunities! This issue talks about Techub News's ecological strategy, the highlights and bottlenecks of the Hong Kong Carnival, the pitfalls of compliant entrepreneurship, and her belief in Bitcoin, full of practical information!

(The audio transcription has been processed by AI and may contain omissions and errors.)

Welcome this episode’s guest, please introduce yourself to everyone!

Alma: Good evening, everyone. I am Alma. Many friends who are familiar with me also call me "Mumu" because my Chinese name is more intimate. I started to enter the Web3 industry in early 2017, and it has been about 8 years now. I founded Techub News in early 2023. The company was invested by two very senior investors in the industry.

Techub News is a Web3 technology media based in Hong Kong. We mainly focus on the content in the Web3 field and strive to create differentiated content. Because I have been in Hong Kong since I entered the industry in 2017, I can say that I have been deeply involved in this industry in Hong Kong.

We at Techub News mainly do the following things:

1. In terms of content, we will interview many experts, scholars and practitioners in the industry. For example, after the Hong Kong government issued a virtual asset policy declaration at the end of October 2022, we immediately interviewed President Chen of the Web3.0 Association, compliant exchanges such as OSL, and some professors and scholars from the Hong Kong Polytechnic University and the Hong Kong University of Science and Technology, as well as many industry practitioners. Some are video interviews, and some are text interviews.

2. In terms of activities, we have a very close cooperation with Cyberport, an incubator endorsed by the Hong Kong government. We held our first event on March 4, 2023. At that time, my company had not yet been officially registered and named, but we had already started to organize activities. We have done a lot of project roadshows, such as Big Demo Day, which is basically one every month. So far, more than a dozen sessions have been held and we have received strong support from Cyberport. We have also held industry discussions and summits of different sizes in places such as Science Park, Wan Chai, and Causeway Bay. As for online activities, we have also held hundreds of them, such as inviting the Chief Secretary for Administration of Hong Kong to interpret policies, or inviting some industry guests to share.

3. Ecosystem construction, we hope to invite global Web3 builders to come to Hong Kong to build Hong Kong's Web3 ecosystem together. Overall, Techub News is a Web3 media based in Hong Kong, focusing on Web3 content, and promoting Hong Kong to become a global Web3 center through content, activities and ecosystem construction.

Thanks to Mankiw Law Firm and Attorney Niu for the invitation!

Q1: Techub News followed the Hong Kong Carnival throughout, let’s review the highlights and feelings of the event!

Alma: When we held the Consensus Hong Kong conference in February this year, we had already started to do full interviews, covering exhibitors and speakers, interacting online and offline, and the effect was very good. Because not every audience or our readers can come to Hong Kong in person, everyone wants to experience it up close. So at the Web3 Carnival in April, we continued this online column, live broadcasting for three days, basically covering all exhibitors and communicating with them.

In general, the scale of this carnival is larger than last year, and the space is about 1.5 times that of last year, so everyone will feel relatively comfortable inside. I haven't seen the official attendance data, but from my observations during the three-day interview, the flow of people every day is not bad. Some friends may feel that there are not as many people this time as in the past, perhaps because the space has become larger and it seems less crowded.

From the process point of view, the experience of this carnival is better than in the past. OKX sponsored the self-service ticket collection system and launched NFT tickets. The audience can pick up the tickets one day in advance, unlike the previous 2049 conference, where everyone lined up in the morning to pick up the tickets. So the overall experience is much better than in the past.

From the perspective of exhibitors, the conferences in February and April have a common feature, which is that they are mainly exchanges. During the Consensus in February, there were relatively large exchanges such as CoinW and Gate. The carnival in April was similar, with large exchanges dominating, such as OKX, TON, and GMGN, which were the title sponsors. I feel that the number of sponsors in April is a little less than last year. Last year, there seemed to be more title sponsors. This year, I was impressed by OKX, TON, and GMGN. Most of them focus on projects on the chain, or decentralized projects, such as Dex and chain ecology. From this perspective, we can see the trend of industry development. On the one hand, there is compliance, such as Hong Kong's compliant licensed exchanges; on the other hand, there are on-chain projects, and the wealth effect on the chain is more obvious. For example, OKX sponsored this time through the OKX Web3 wallet, and GMGN was also a newcomer that emerged last year and developed very rapidly.

In terms of public chain projects, TON gave me a big surprise this time. As a large title sponsor, TON's own booth is actually not big, and there is not much publicity, but more space is given to its own ecological projects. TON brought dozens of ecological projects, covering different tracks. In the process of communicating with these project parties, I feel that their business models are more down-to-earth and pragmatic than in the past, and they all have their own business logic. In contrast, other public chain projects, such as Aptos, Polkadot, and Sui, had booths during Consensus, but the booths in April were relatively small and the influence was not so prominent.

As for innovative projects, I feel that there are relatively few innovative new projects at this carnival. They are basically old and familiar projects without many exciting innovations. This may also be the current status of the industry. Everyone is waiting for new narratives or breakthroughs.

Overall, most of the projects that can participate in the exhibition are related to transactions, such as exchanges, trading tools, wallets, OTC, and PayFi. These projects have their own cash flow and can afford sponsorship fees, which shows that they are doing well in the current market environment. In contrast, other types of projects, such as some early innovative projects, are relatively rare.

Hong Kong local institutions also performed well, such as Bosera Fund, ZhongAn Bank, and Shengli Securities. Bosera Fund and HashKey launched financial products, and Shengli Securities' physical delivery products were also very attractive. Their products have some innovations within the compliance framework, which is quite interesting.

In terms of the guest lineup, this carnival can be said to be unprecedented. Vitalik attended the meeting, Hong Kong government officials were also present, and a new roadmap for virtual assets was released. This shows the Hong Kong government's determination and support for Web3.

In general, the carnival in April was larger in scale, with more important guests and better process experience, but the project innovation and ecological diversity did not reach the level of letting a hundred flowers bloom. The industry narrative is currently a bit lacking, and innovation needs further breakthroughs.

Niu Xiaojing: There are too few innovative projects and a lack of narrative. Next, let’s talk about the overall trends and bottlenecks of the industry.

Q2: Has the Web3 industry entered a bottleneck period? What challenges are it facing now?

Alma: This topic has actually been discussed by friends in the industry. I think the Web3 industry is indeed in a relatively bottleneck period, with low coin prices, exhausted narratives, and unsustainable hot spots. Last year, Meme coins were very popular, especially when Trump issued coins, which reached a peak. Some people live-streamed suicides and homicides. This extreme phenomenon shows that this model is unsustainable. Now that the coin price has fallen back and Meme coins are sluggish, the industry is looking for new paths.

The previous round of VC model - looking for institutional endorsement, packaging team, writing white papers, and listing on exchanges to reap the benefits - has become ineffective. Because the valuation is too high, for example, the market value of a coin listed on an exchange is 1 billion US dollars, and retail investors have no illusions of wealth. The fair launch and transparency of Meme Coin is an attempt to follow the old path, but it is still a casino model in essence and lacks long-term value.

Another challenge is the lack of innovation. Many projects are old faces and lack exciting new narratives. The industry needs new breakthroughs, such as on-chain products, which may be the direction, but it is still in the exploratory stage.

Niu Xiaojing: You mentioned that Meme coins are unsustainable, the VC model is ineffective, and narratives are exhausted, which really pointed out the pain points of the industry.

Q3: What future trends and highlights do you see in the carnival?

Alma: Despite the bottlenecks, there are still some bright spots and trends in the industry that are worth paying attention to. I think there are two main trends in the future.

The first trend is compliance and centralization. The Web3 industry will definitely become more and more compliant, the entry threshold will become higher and higher, and related products will become more and more abundant. Asset tokenization, that is, RWA (real world assets), is a huge market. Hong Kong is becoming a virtual asset center, which can be seen from policies and the return of talents. When I entered the industry in 2017, the 94 policy allowed Binance to seize the opportunity and siphon traffic from other exchanges. At that time, after CZ went overseas, I hadn't seen him in Hong Kong for many years. I usually met him in Taiwan or Singapore. But this time, many industry veterans have returned. Last year I met Wu Jihan in Hong Kong. He was setting up a compliant crypto fund. This year, CZ, Bao Erye, Sun Yuchen, and Li Lin are all active in Hong Kong. Bao Erye said in an interview with me that he has plans to return to Hong Kong. The return of these big guys shows that Hong Kong has huge opportunities in the fields of compliance and RWA. The Hong Kong government has strong policy support, and the global political and economic situation has also made more Chinese choose Hong Kong. For example, some family offices that chose Singapore before are now starting to return to Hong Kong. This is a trend of centralization and compliance.

The second trend is the vitality of the chain. I think the real vitality of the Web3 industry lies in the chain. The wealth effect in 2024 mainly comes from on-chain projects, such as the Bitcoin ecosystem, the payment track PayFi (payment finance), and the decentralized exchange Dex. In addition to the rise of Bitcoin, on-chain projects also bring many opportunities. Centralized exchanges feel the pressure on the chain and have laid out on-chain products. For example, OKX launched the Web3 wallet at the end of 2022. When I went to their Causeway Bay office, they said that the KPI valued the most was the number of Web3 wallet registrations. Binance is developing the BSC chain, and HashKey's focus in 2025 is the HashKey chain, and it plans to launch its own Dex.

The payment track is particularly hot. There are about 600 million people holding Crypto in the world. In some areas with unstable currencies, such as Turkey, people are increasingly in need of spending directly with Crypto without withdrawing cash. For example, there are real estate agencies in Dubai that support buying houses with Crypto, and the emergence of U cards. These are all major trends in the future. I personally admire Xu Mingxing of OKX. He has a strong vision and has laid out a Web3 wallet as early as 2022. HashKey is also accelerating the development of the chain. These are all highlights of the industry.

Niu Xiaojing: The compliance roadmap is becoming clearer, leading Chinese figures are returning to Hong Kong, and on-chain innovation and the payment track are rising, which are indeed in line with the general trend of the industry.

Q4: What is the Hong Kong government’s positioning, policy support, and regulatory environment for Web3?

Alma: After the Hong Kong government issued its virtual asset policy declaration at the end of October 2022, it has made it clear that it wants to build Hong Kong into a global Web3 center. When I entered the industry in 2017, the 94 policy was a node. Before 94, I often went to the mainland, especially Beijing and Shanghai. At that time, Beijing's Crypto ecosystem was very complete, with strong miners, exchanges, mining machines, media, and communities. After 94, I returned to Hong Kong. At that time, Hong Kong's regulatory environment was very relaxed and the government was tolerant. At that time, many well-known companies were born in Hong Kong, such as FTX, BitMEX, and Tether, all of which went out of Hong Kong. Major exchanges around the world are also distributed in Hong Kong. In 2018, we did a quantitative activity for Huobi. The data at that time showed that Hong Kong's Crypto exchanges ranked fifth in the world. Although the number was small, the user quality was high and the investment scale was large.

Before the pandemic, regulation in Hong Kong was relaxed and tolerant. Around 2018, some teams began to try to become licensed exchanges, but the government policy was not as clear as it is now, and it was more about exploration and sandbox regulation. The application period for a license was very long, and many teams gave up because they could not sustain the funds.

The declaration at the end of October 2022 was a turning point. This time it was a top-down innovation, and the policy was implemented very quickly. At the end of 2022, the futures ETFs for Bitcoin and Ethereum were launched. In 2023, spot ETFs were also launched, supporting physical subscriptions, which is a world-leading innovation. There are now 10 compliant licensed exchanges in Hong Kong, such as OSL and HashKey. OSL was the first to obtain a license during the epidemic, and HashKey is now also open to retail investors.

Hong Kong's regulatory environment can be described as "whatever is allowed by law can be done". Once legislation is enacted, there are clear rules for what to do and what not to do. For example, compliant exchanges need to meet the different requirements of retail and professional investors, and the scope of token trading is also strictly limited. This kind of compliance brings government endorsement, but also adds a lot of shackles. I think most of the compliant exchanges in Hong Kong are not profitable at present, and the trading depth is not enough. They mainly rely on the money burned by the financial backers to plan for the next 5 to 10 years.

In contrast, OTC business is currently the most profitable, especially the deposit and withdrawal services, which have clear profits. Traditional institutions are also accelerating their entry into Hong Kong, such as Bosera Funds and Shengli Securities, which are launching compliant products.

Q5: Compared with Singapore and Dubai, what are the advantages and disadvantages of Hong Kong? What advice do you have for entrepreneurs?

Alma: Let me start with Hong Kong’s advantages:

First, as an international financial center, Hong Kong has a very complete financial system and legal system, and a sufficient talent pool.

Second, Hong Kong is backed by the mainland and is connected to a market of 1.4 billion users. Mainland users are not only numerous, but also of high quality, with a strong gambling nature, a preference for small coins, and a large wealth effect. Users in the Asia-Pacific region are more willing to trade at high frequencies than users in other regions, which is why exchanges value the Asia-Pacific market.

Third, the "front shop and back factory" model of the Greater Bay Area. Hong Kong is the front shop, responsible for branding and compliance; Shenzhen is the back factory of the Greater Bay Area, reserving technical talents. Many exchanges, such as Binance and OKX, have their technical teams in Shenzhen. Techub News also wrote an article observing that industry practitioners moved south from Beijing, Chengdu, Hangzhou, and Shanghai to Shenzhen. Mankiw Law Firm also moved from Shanghai to Shenzhen, indicating that the synergy effect of the Greater Bay Area is very strong.

Fourth, Hong Kong is more livable for Chinese people. Hong Kong has Chinese culture, global cuisine, country parks, world-leading education and medical care, and the world's highest life expectancy. Compared with Singapore's Southeast Asian culture and Dubai's non-Chinese environment, Hong Kong is more attractive to Chinese people. Fifth, Hong Kong is a service-oriented government that is willing to listen to opinions and has flexible policies. In contrast, the Singaporean government is more powerful and has fewer opportunities to make money.

On the downside, Hong Kong has a high compliance threshold, and exchanges will not make money in the short term. The cost of living is also high, with housing prices and daily expenses more expensive than in Singapore and Dubai. In addition, Hong Kong has not caught up with the Internet and mobile Internet era, and Web3 innovation was once questioned as "much ado about nothing". However, this time the top-down policy was implemented quickly, proving Hong Kong's determination.

Compared with Singapore and Dubai, Singapore has strong policy support, but a strong government, a Southeast Asian culture, and is not as livable as Hong Kong. Dubai has an open policy, but its legal system is not as perfect as Hong Kong, and the Chinese people are less adaptable to life. Hong Kong's unique advantages are the mainland market, Chinese culture, and sound laws.

Suggestions for mainland entrepreneurs: Hong Kong's Cyberport already has more than 200 Web3 companies, many of which are Hong Kong companies registered by mainland teams. If you want to get government subsidies, such as incubation programs, you may need a local Hong Kong contact in the team. Non-compliant exchanges cannot be publicly promoted in Hong Kong, and the risk of breaking the law is high. It is recommended to consult Mankiw Law Firm to ensure compliance.

Niu Xiaojing: Hong Kong's efficient policies, sound legal system, and advantages backed by the mainland market make it an ideal place for Web3 entrepreneurship. The live broadcast room partner mentioned some specific issues, such as RWA, the path and risks of mainland investors, and the legality of OTC. We will ask Alma to answer them next.

Q6: What is the development status and representative projects of RWA?

Alma: Currently, RWA is still in the early stage of exploration. For example, in the case of Longxin Group, most projects are still verifying the technical feasibility and have not yet been issued in the primary and secondary markets. The source of funds is mainly the project's own funds or financing from acquaintances. To make an RWA project, you need strong product capabilities and fundraising capabilities. The core challenge is the infrastructure of stablecoins. Hong Kong is accelerating the legislation of stablecoins, and I believe it will be implemented soon. Once implemented, it will greatly promote the development of RWA.

There are not many representative RWA projects at present. Longxin Group is a typical case. They are trying to put real-world assets on the chain, but it is still in the experimental stage. In the future, as the stablecoin infrastructure is improved, more projects will emerge.

Q7: What are the investment paths and risks for mainland investors in Hong Kong?

Alma: The investment path for mainland investors in Hong Kong. Currently, compliant exchanges such as HashKey are only open to local Hong Kong and some overseas users. Mainland users cannot register and trade. However, mainland investors can make deposits and withdrawals through Hong Kong's OTC services. Transactions with amounts below 10 million to 12 million Hong Kong dollars usually do not require KYC and are mostly cash transactions. You can bring cash to OTC outlets and exchange directly.

For mainland friends who want to start a Web3 business in Hong Kong, Cyberport is a good starting point. There are already more than 200 Web3 companies there, many of which are Hong Kong companies registered by mainland teams. It is very simple to register a Hong Kong company. When applying to join Cyberport, you need to explain the project direction. If you want to apply for government subsidies, such as incubation programs, it is best to have a local Hong Kong contact in the team to facilitate communication.

In terms of risks, if your project targets mainland users and provides non-compliant Crypto services, it may involve illegal activities. Hong Kong is paying more and more attention to compliance. You need to make it clear whether the user group is Hong Kong or mainland China. It is illegal for non-compliant exchanges to publicly advertise in Hong Kong. Techub News has published an article that details the precautions for non-compliant exchanges in Hong Kong. You can go to our APP to read it. I believe that Mankiw Law Firm is more professional in this regard and can provide more specific guidance.

Q8: What is the legality of OTC ATMs in Hong Kong?

Alma: Regarding the legality of OTC ATMs, Hong Kong's OTC regulation has not yet been fully implemented, and it was still in the second round of consultation in April. Cash transactions below a certain amount do not require KYC, so it is currently legal. Whether taxes need to be paid depends on the operating model of the specific outlet. It is recommended to consult a professional law firm, such as Mankiw Law Firm, to get a clearer answer.

Q9: As a media person, how do you filter valuable information about Web3?

Alma: Information is exploding and there are more channels, but it is harder to get valuable information. We have been thinking about how to filter content and stick to the principles of the media. Let me share Techub News's practices and some lessons learned in 2023 and 2024.

When I entered the industry in 2017, a friend recommended a token that looked great, but I ended up losing a lot of money. I realized that there was a big gap in the cognition of novices, and many people had to pay tuition to learn. The original intention of my founding Techub News was to break the information asymmetry, help users make correct investment decisions, and obtain valuable information.

Our principles for selecting content are value orientation and sustainability. Although Meme coins have a large flow, we rarely report on them because we know they are unsustainable. Our content team believes that these are market bugs, just like short-term casinos. In April last year, the Bitcoin ecosystem was particularly hot, and even my investors asked me what hot opportunities there were, fearing that they would miss the trend. At that time, the hype was fierce, investors were very passive, project parties asked for high prices, and there was no room for negotiation on valuation. But we remained calm and predicted that this craze was unsustainable. Now the Bitcoin ecosystem has cooled down, although there are still some high-quality projects persisting.

We have also made a clear statement on Pi Coin. The Pi Coin community is large and relies on free airdrops to attract users, but we believe that its operating model is suspected of being a pyramid scheme, so we have publicly expressed our concerns. Recently, there was another case where an exchange provided loans to college students for futures trading. We and other media criticized this behavior because it targeted inexperienced young people and was equivalent to inducing gambling. This high-risk, short-lived project is harmful to the long-term development of the industry.

Our content director said something that touched me: If we chase all hot topics for traffic, we will go against the original intention of the media. We hope to improve users' awareness, guide the industry forward, and protect retail investors. Therefore, our news is very selective, focusing on content with lasting value, rather than drowning users with noise.

Suggestions for users: Download Techub News APP to get the valuable information we have selected. Follow some well-known foreign media to broaden your horizons. Cultivate expert thinking: Who is behind the hot spots? Why is it public? Trading is anti-human, less action, more patience, hoarding Bitcoin is often more effective than chasing hot spots.

Niu Xiaojing: It is admirable that you insist on screening sustainable content and protecting retail investors.

Q10: After 8 years in the industry, what personal insights or life lessons do you have?

Alma: I have been in the industry for 8 years. This industry has changed very quickly, and there are many stories of grassroots people turning into bigwigs. My biggest feeling is "virtue can carry all things". In 2017, I was the first blockchain media in Hong Kong, and I have interviewed countless early entrepreneurs and so-called bigwigs. Many people started as ordinary people, chose the right industry and timing, and accumulated huge wealth, but few people can keep their wealth.

For example, Bao Erye, I met him several times in Hong Kong in 2018 and had dinner together. When Bitmain IPO, we discussed this topic on the same stage. I think Bitmain IPO has a good prospect, but Bao Erye asserted that it would not be listed, and criticized Wu Jihan and others. I disagreed at the time, but later he was proved right. Now I think he is wiser. He held shares in Binance and TRON in the early days, and Binance's BNB is now worth $700 million. He felt that he had too much wealth and was beyond his control, so he proposed to build a charitable fund in Malta, although it did not succeed. Recently, he and CZ plan to rebuild this fund in Abu Dhabi.

The big guys who can keep their wealth all have the characteristics of quitting at the right time and giving back to society. I have seen many people who held thousands of bitcoins in the early days, but later lost most of them due to wrong decisions. People who can settle down often know how to quit at the right time and give back to society.

My core belief in this industry is to believe in Bitcoin, but it is difficult to combine knowledge and action. I advise all listeners: use 10% of disposable assets to hold Bitcoin, don't go all in, you can surpass 90% of people in the market. Don't chase short-term fluctuations, no one can continuously buy low and sell high. There is a story that inspired me. I know a low-key big man who started hoarding Bitcoin in 2012. At that time, the price was 200 yuan, and he didn't sell a single one. He predicted that Bitcoin would reach 20,000, 200,000, or even 2 million yuan based on the logic of Austrian economics. I asked him why he didn't sell it, and he said: "Why sell the best assets to exchange for something as fleeting as a villa?" His belief influenced me. I suggest everyone: use funds that do not affect your life, take a small part to hoard Bitcoin, endure loneliness, and ignore fluctuations. Now the market is volatile, and only those who hold for a long time can laugh to the end.

Niu Xiaojing: "Hoard Bitcoin, and integrate knowledge and action" is really a heartfelt statement! I came into contact with Bitcoin in 2017, and after tossing and turning, it is not as simple as hoarding coins. In summary: firmly believe in the future of Web3, integrate knowledge and action, chase less hot spots, and build more long-term value. Thank you again for your sincere sharing!

Alma: Trading is anti-human! I hope everyone remembers: think like an expert, be patient, don’t go all in, and use disposable assets to hoard Bitcoin. I look forward to communicating with you more through Techub News!

Starting a business is not easy, but your story must be cool!

Welcome to join Mankiw’s “Entrepreneurship Web3 Column” to inject real and fresh power into China’s Web3.

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