The entry of Futu this time means that all the top securities firms in Hong Kong have entered Web3.
By: Wu Tianyi
On August 1st, according to Ming Pao, Futu Hong Kong officially launched virtual currency trading services regulated by the Hong Kong Securities and Futures Commission today, including four spot trading pairs including BTC, ETH, and USD and HKD, which can directly use Hong Kong dollars and US dollars to buy virtual currency at real-time exchange rates.
According to the official website, Futu currently holds Hong Kong licenses No. 1 and No. 7, while established securities firms such as Edi, Victory, and Tiger hold license No. 1. Starting from June 1, 2023, engaging in virtual asset trading services in Hong Kong also requires obtaining the "VASP license" issued by the Securities and Futures Commission. According to information on the official website of the Hong Kong Securities and Futures Commission, the VASP licenses of these securities firms are still under application, and the applications of Futu and Tiger are currently in a "deemed licensed" status.
DeThings reporters observed that these securities firms mainly expand their business through cooperation with compliant exchanges. Previously, at the first HashKey New Vision Forum in June, Livio Weng, CEO of HashKey Exchange, a licensed virtual asset exchange in Hong Kong, revealed that they have already cooperated with Futu on virtual asset trading and are integrating technical systems. Once Futu's No. 1 license upgrade is approved, they will be able to provide BTC and ETH trading services to customers.
Currently, in addition to being the largest licensed exchange in Hong Kong, HashKey Exchange has also become the largest omnibus service provider in Hong Kong.
With the largest trading volume and best liquidity in the licensed market in Hong Kong, almost all mainstream Hong Kong securities firms currently provide trading services to customers by accessing HashKey Exchange. According to an announcement by HashKey Exchange, the weekly trading volume of the Omnibus broker business has exceeded 100 million Hong Kong dollars. For a business that has just started, this is quite an impressive performance.
When securities firms enter the cryptocurrency trading market, their business scope will be different from traditional securities firms. According to the Securities and Futures Ordinance of Hong Kong, the Securities Law of the People's Republic of China, and other laws defining securities firms, they are legal entities that provide securities trading services to investors, accepting customer orders and executing securities transactions on behalf of clients for a fee, while proprietary trading is the business of securities firms conducting securities transactions in their own name. Securities firms are not allowed to accept deposits, make loans, or engage in securities lending. Therefore, before obtaining the VASP license, these securities firms may need to provide virtual asset services in the form of cooperation.
Futu Securities is the largest technology securities firm in Hong Kong, with a registered user base accounting for about one-third of the adult population in Hong Kong. The user asset amount is approximately 485.6 billion Hong Kong dollars, and the total trading volume in 2023 reached 4.2566 trillion Hong Kong dollars. In addition, there are other Hong Kong securities firms with similar experiences to Futu, such as Tiger and Interactive Brokers, which have American backgrounds, Victory Securities and Richland Securities with Hong Kong backgrounds, and more low-profile Hong Kong securities firms with Chinese backgrounds.
The entry of Futu this time means that all the top securities firms in Hong Kong have entered Web3.
In May, Victory Securities stated that it is currently applying for a Hong Kong virtual asset trading exchange license, and its securities token offering (STO) business is expected to be launched by the end of the year. In June, Tiger Securities (Hong Kong) announced that it has officially launched virtual asset trading services for retail investors in Hong Kong. In July, Hong Kong Edi Financial announced that it will soon launch Bitcoin and Ethereum trading functions through its smart trading app Eddid ONE.
The pace of these securities firms seems a bit hasty, and there may be many reasons behind it. First, since the approval of the Bitcoin ETF in January this year and the completion of the fourth Bitcoin halving in April, the price of Bitcoin once reached $74,000. However, in the past few months, the price of Bitcoin has fluctuated repeatedly, and there have been frequent discussions in the market about whether this bull market is already halfway through or has already peaked. Perhaps these securities firms do not want to miss out on this bull market, so they are actively promoting virtual asset trading services.
Second, the continued weakness of the Hong Kong stock market may also create certain pressure. Data shows that the Hang Seng Index has dropped from over 30,000 points to a low of 14,863 points over the past three years, and it has only recovered to 17,000 points at present. Previously, the trading volume of Hong Kong stocks on multiple trading days was less than 100 billion Hong Kong dollars, and the trading volume of over a thousand Hong Kong stocks was below 10,000 Hong Kong dollars, with over 700 Hong Kong stocks having zero trading volume. In addition, in the first half of this year, 19 listed companies were delisted from the Hong Kong stock market, with 8 of them being privatized, involving a total amount of 3.8 billion US dollars.
At a time when the Hong Kong stock market is experiencing a "cold wave" and listed companies are frequently delisting, securities firms choosing cryptocurrency as a new investment option may be a shot in the arm for the Hong Kong financial market. Their entry represents a gateway for a large number of Web2 users to connect to virtual assets.
According to the latest survey by the Hong Kong Investor and Financial Education Committee (Investment Committee), 96% of retail investors have invested in stocks in the past year, 24% have invested in funds, and 18% have invested in bonds. Among them, 8% have invested in virtual assets and related products, showing a significant increase compared to 1% in 2019 and 6% in 2021.
Currently, there are approximately 4 million stock investors in Hong Kong. Futu Securities stated that according to its industry survey, over 40% of investors who have not traded virtual assets expressed their desire to trade on the Futu Bull platform, and nearly 75.6% of experienced investors also support the launch of virtual asset trading services on the Futu platform.
In August last year, Wu Xiaochi, Chief Operating Officer of HashKey Group, also stated that they are cooperating with approximately 5 local securities firms in Hong Kong to establish gateways related to HashKey cryptocurrency trading services. Wu Xiaochi expressed hope that through these securities firm platforms, they can directly provide cryptocurrency trading services to investors, which "may bring tens of millions of users trading Hong Kong stocks on these platforms."
In addition, Hong Kong has been criticized for its high compliance costs, and service providers may not be able to cover their costs. However, according to a report by Wen Wei Po, Victory Securities revealed that its virtual asset-related income can account for a quarter of the company's total income, or even one-third, benefiting from the advantage of entering the market early. Its investment in virtual assets has roughly broken even, and it is now profitable.
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