Journalist: Wu Tianyi

Intern journalist: Riley

Produced by: DeThings

On September 18th to 19th, the TOKEN2049 summit was held in Singapore as scheduled. As a globally anticipated event in the cryptocurrency industry, the two cities of Hong Kong and Singapore, which have previously hosted the summit, have once again become the focus of attention. The strengths and weaknesses of the two cities in terms of policy friendliness, attractiveness to tech talent, and financial infrastructure have been the subject of continuous industry attention. The discussion about which city, Hong Kong or Singapore, can stand out in this competition has been ongoing.

On September 19th, the CEO of HashKey Exchange, Weng Xiaoqi, was interviewed by DeThings at the TOKEN2049 conference. As a licensed cryptocurrency exchange headquartered in Hong Kong, Weng Xiaoqi mentioned in the interview that the regulatory differences between Hong Kong and Singapore have given each a unique position in the development of the Web3 industry. Hong Kong places more emphasis on the regulation of exchanges, while Singapore focuses more on areas such as trade, payments, and funds, creating a certain competitive relationship. Regarding tech talent, Weng Xiaoqi pointed out, "The foundation of tech talent in Hong Kong and Singapore is different. Hong Kong has more advantages than Singapore, especially in attracting talent from the mainland. In comparison, most of Singapore's Web3 talent is attracted from around the world."

Furthermore, Weng Xiaoqi also stated, "As soon as the interest rate cuts begin, market sentiment will gradually turn bullish in the coming year," he said, with the global financial market adjustments, especially against the backdrop of interest rate cuts in the US dollar, cryptocurrencies will enter a new growth cycle, especially Bitcoin, with its constant supply and long-term investment value, has become a focus of global financial institutions' deployment.

The following is the interview transcript, with some deletions and modifications.

"Both Hong Kong and Singapore will continue to be the center of global cryptocurrency assets"

DeThings: How do Web3 practitioners in Singapore view the regulation of Web3 in Singapore? In what direction will global regulation develop in the future? Weng Xiaoqi: Singapore has been relatively supportive of the cryptocurrency industry globally. As early as 2017, Singapore made it clear that token issuance is legal locally. Due to clear and protective policies, many practitioners have been attracted to Singapore to conduct business. Around the same time, Japan and Singapore took similar actions, establishing their important positions in the global Web3 field.

However, it is worth noting that Japan and Singapore have different regulatory positions and policies. Japan adopts a strict and clear regulatory framework, while Singapore's approach is relatively relaxed. This lenient regulatory attitude in Singapore is closely related to its role as a global trade hub and its long-term policy of encouraging foreign investment. Therefore, Singapore appears more open in allowing legal token issuance. At that time, many project parties planning to issue tokens would choose to register companies in Singapore or offshore companies and issue tokens in accordance with Singaporean law.

The reason for setting up token foundations and governance structures in Singapore was initially due to this lenient regulatory environment. As the regulatory frameworks in other regions were unclear or opposed to cryptocurrencies, many practitioners moved to Singapore, which quickly made its mark in the Web3 field and became an important center for Web3 globally.

However, due to the impact of the FTX incident, Singapore's regulatory attitude has become more conservative in the past two years. In fact, the global trend in regulation is moving towards greater compliance. The most representative regions are Hong Kong, Dubai, and Abu Dhabi in the UAE. Next, Europe may also move towards compliance, and the global market is gradually transitioning from disorder to standardization. The policy direction of the United States is closely watched, especially if Trump returns to office, which may accelerate the formulation of relevant laws. Therefore, regulatory efforts around the world are gradually entering a compliant era.

For a long time, the industry did not have a clear timetable for compliance. However, an important turning point was the increased regulatory pressure on major cryptocurrency exchanges in the United States and the severe measures taken against early exchanges that did not focus on compliance, even holding them criminally responsible. This has made both the industry and the public aware that regulation has entered a new stage. In fact, since the Financial Action Task Force began advocating global regulation of cryptocurrencies in 2018 to prevent money laundering, terrorist organizations, and transnational crime from abusing cryptocurrencies, many countries around the world did not truly pay attention to this issue until the United States strengthened its regulation of cryptocurrencies, leading to a shift in global regulatory trends. More and more countries are taking action, from France to Nigeria in Africa, and many other countries, large and small, are beginning to regulate cryptocurrencies.

Many countries are not only strengthening regulation at the legal level but also starting to hold relevant illegal activities accountable from a criminal responsibility perspective. 2023 is the year of compliance for the entire industry, and the global cryptocurrency industry is gradually moving towards compliance. In the past, the industry operated in the gray area, but now compliance has become an unavoidable requirement. Many industries have gone through a gray area in their development, including the banking industry. For example, in Chinese history, the earliest ticket numbers or money shops developed from informal order. For example, the Shanxi ticket number, at that time, people doing business found it inconvenient to remit money earned from all over the country back to Shanxi, so ticket numbers were set up in various places, forming a private financial system. The ticket number later developed into a large-scale chain enterprise, the most famous of which was Rishengchang, whose founder, Lei Lutai, guaranteed the ticket number with his personal reputation, similar to the personal guarantee model of the founders of cryptocurrency exchanges today. However, any enterprise will face cyclical challenges, including its own cycles, economic cycles, and political cycles, and the ticket number did not continue. Later, the country realized the need for the industry, began issuing licenses, and regulating management, allowing the industry to develop healthily. This history is very similar to the development path of the cryptocurrency industry today.

Starting in 2023, global regulation is gradually tightening, and compliance has become the mainstream trend for industry development. Now, even major exchanges around the world are starting to shrink their businesses in non-compliant markets or close risky business markets. For example, many large exchanges have closed their businesses in Turkey, Nigeria, France, and are actively expanding in licensed markets.

DeThings: Can you explain what "non-compliance" means? For example, is it considered non-compliant for a platform to participate in and profit from trading within the platform?

Weng Xiaoqi: From a compliance perspective, such as the regulatory requirements in Hong Kong, the platform can only act as a trading intermediary and cannot participate in trading activities. In the FTX incident, the platform misappropriated user assets, and the platform's assets were not effectively separated from user assets, which constitutes non-compliant behavior. After the incident, licensed exchanges such as those in Hong Kong's regulatory agencies (such as the Securities and Futures Commission) will conduct regular inspections to ensure the separation of platform assets and customer assets and ensure that the regulatory mechanism can effectively prevent the platform from accessing user funds. These key lessons are gradually being incorporated into the regulatory framework, forming stricter systems and rules.

The overall trend of global regulation is that the unregulated market is gradually shrinking, while the share of licensed markets is gradually expanding. If we consider the ETF in the United States as a form of licensed exchange, it can be foreseen that the market share of global licensed exchanges may exceed 50% in the next two to three years.

In the past, the regulation in various countries mainly targeted illegal securities markets, and now the regulation of cryptocurrencies is mostly derived from the crackdown on illegal securities. When the United States was rectifying the industry, the core issue it first raised was, "Is the asset you are issuing a security?" If it is a security and is not registered, then it is illegal.

Looking ahead, both Hong Kong and Singapore will continue to be the center of global cryptocurrency assets and will continue to optimize and improve relevant laws and regulations. Although Singapore has been somewhat affected by the FTX incident, it still recognizes the importance of the cryptocurrency industry to the country. The development of Web3 has brought significant economic benefits, especially in consumption and trade, as evidenced by the surge in hotel prices and consumption in Singapore, proving the importance of this industry to Singapore.

DeThings: From your observations, do you think Singapore still considers the cryptocurrency industry as an important sector? How does the regulatory attitude in Singapore compare to that of Hong Kong?

Weng Xiaoqi: In fact, we have a deep layout in both Hong Kong and Singapore and hold relevant licenses in both places. Singapore's policies were initially more aggressive and open, while Hong Kong, although positive in attitude, did not make a clear statement at first, and it was not until 2022 that Hong Kong began to issue relevant policies. In 2022, coinciding with the impact of the FTX incident on Singapore, its policies have become more restrictive, and as a result, Hong Kong has taken more steps in regulation, giving the impression that Hong Kong is more proactive.

However, with the implementation of certain policies in Hong Kong in 2023 and 2024, some global practitioners have begun to feel that the regulation in Hong Kong is too strict. Hong Kong's advantage lies in being one of the global financial centers, with a mature financial regulatory system and strong competitiveness in attracting capital. However, because of this, its regulatory process seems overly cautious and lacks a certain degree of flexibility compared to Singapore.

However, Hong Kong has recently realized the importance of the cryptocurrency industry and has begun to accelerate its opening up. For example, in the past, Hong Kong only allowed retail investors to trade Bitcoin and Ethereum, but recently added two new currencies and plans to open up trading for more currencies. In addition, Hong Kong has also launched a regulatory sandbox for the Hong Kong dollar stablecoin and is promoting the regulation of central bank digital currencies (CBDC). These measures indicate the increasing importance of Hong Kong in the Web3 field.

Hong Kong has also quickly launched the first Ethereum ETF, competing with the United States in this area. This also signifies the increasingly important role that Hong Kong plays in the Web3 and financial fields. Compared to Singapore, which will be more cautious after experiencing a setback, it is also seeking a balance between openness and regulation. In the next five years, the global compliance trend will become more apparent, and a flexible regulatory environment will bring advantages to various regions. Both Hong Kong and Singapore have flexibility, so the prospects are promising.

DeThings: Currently, do Hong Kong and Singapore have different focuses in their businesses? Is there competition between the two?

Weng Xiaoqi: The competition between Hong Kong and Singapore in business is very apparent, and many practitioners are considering whether to continue staying in Singapore or move to Hong Kong. This situation of one gaining while the other loses is particularly prominent in the short term. I believe that Hong Kong's current focus is on exchange regulation, as Hong Kong already has a mature exchange business system, such as the Hong Kong Stock Exchange and other globally renowned platforms. Singapore does not have such a large industry in securities trading and may focus more on trade, payments, funds, and over-the-counter (OTC) trading. Therefore, the two places have different focuses in their businesses. The first phase of regulation in Hong Kong mainly targets exchanges, including existing on-exchange trading and OTC trading. Hong Kong's regulatory system is brewing a partial regulatory responsibility shared by the Securities and Futures Commission and the Customs, which is an important difference compared to Singapore.

DeThings: As a practitioner, how should I choose the right location? If Hong Kong is currently mainly focused on exchange regulation, will it bring a problem where participants are limited to companies with certain specific backgrounds? For example, if I have developed an excellent DeFi program but do not have an exchange background, will I be unable to enter this market?

Weng Xiaoqi: For practitioners, Hong Kong does not prohibit non-exchange Web3 applications; in fact, it encourages such innovations. However, due to the stricter regulation of exchanges, if you are involved in this area, you will face more restrictions. For example, DeFi is an encouraged innovative application in Hong Kong. You need to consider more about the management radius, management costs, and where your target market is. Is it more suitable in Hong Kong or in Singapore for convenience of development? It also depends on how much you value tech talent.

The foundation of tech talent in Hong Kong and Singapore is different. Hong Kong has more advantages than Singapore, especially in attracting talent from the mainland. For example, the geographical advantage of Shenzhen and Hong Kong allows the two places to develop synergistically through the "front shop, back factory" model, with the research and development entity in Shenzhen and the storefront in Hong Kong. This collaborative model gives Hong Kong a better foundation in talent resources in the Greater Bay Area. In comparison, most of Singapore's Web3 talent is attracted from around the world, and its foundation is relatively weaker. Therefore, if you value research and development, Hong Kong may be a better choice.

"Is Web3 compromising with traditional finance, or is traditional finance forced to embrace Web3?"

DeThings: Under the current and future regulatory status, how can overall market liquidity be ensured?

Weng Xiaoqi: This is related to the discussion today about the interest rate cuts in the US dollar. Over the past two years, the major currency policy trend globally has been the interest rate hikes in the US dollar. The effect of the interest rate hikes is to attract global funds to the United States, so financial assets, including Crypto ETFs, have not performed well, and market liquidity has been suppressed. The only exception is gold, but the rise in gold has many other factors, such as war, geopolitics, and so on.

However, as more and more sovereign countries begin to sell US bonds and dollars, trust in the US dollar is gradually decreasing. Once the interest rate is cut in the future, especially when the interest rate falls below 2%, stock markets in emerging markets around the world and other financial assets may usher in a new bull market, and the Crypto market will be no exception. The long-term value of Bitcoin will become more apparent, as the total supply of Bitcoin is constant, with 21 million coins that will not increase, and the actual circulation of Bitcoin is constantly decreasing due to reasons such as lost private keys.

This year, various funds in the United States are increasing their holdings of Bitcoin, and these holdings have made significant purchases in the ranges of $10,000, $20,000, $30,000, and $40,000. Therefore, when the US dollar begins to cut interest rates and inflation rises, their average purchase price will be lower than that of other latecomers in the financial institutions, giving them a competitive advantage.

DeThings: What impact will a 25 or 50 basis point interest rate cut by the Federal Reserve have on the price of Bitcoin?

Weng Xiaoqi: In the short term, the market's response to an interest rate cut will be different. If there is a 50 or even 75 basis point cut, the market's response will be more positive. If it is 25 basis points, the market may take a neutral stance. However, as soon as the interest rate cut begins, market sentiment will gradually turn bullish in the coming year, driving increased liquidity in ETFs.

DeThings: Going back to the historical question, as Bitcoin is strongly correlated with the US dollar interest rate cuts, does it mean that Bitcoin has lost its initial decentralization and anarchism?

Weng Xiaoqi: Not at all. In fact, this is a classic question. In the discussions last year when the United States approved Bitcoin ETFs, there was a fierce debate within the industry: Is Web3 compromising with traditional finance, or is traditional finance forced to embrace Web3? Currently, it is more of the latter, meaning that traditional financial institutions have no choice but to accept Web3. The fact that traditional financial institutions are exchanging their US dollars for Bitcoin is because they anticipate that the long-term value of Bitcoin is higher than that of the US dollar. This is not Web3 bowing to traditional finance; instead, it is a victory for Web3, indicating that Bitcoin replacing some of the value of the US dollar has become an irreversible trend. Infrastructure is gradually being improved, and the potential of Web3 will gradually be unleashed.

DeThings: Apart from interest rate cuts, what other aspects are the industry focusing on?

Weng Xiaoqi: Interest rate cuts reflect the financial attributes of Web3, showing its interdependence with traditional finance. Therefore, the financial attributes are a key focus. In addition, the industry is more looking forward to the implementation of Web3 application scenarios. For a long time, many people thought that Web3 products were just tokens used for scams, but now more and more effective scenarios are emerging.

For example, GameFi and cross-border payments have already had practical applications, and DeFi is also integrating with traditional finance. We are now waiting to see who will be the first to launch the revolution.

DeThings: NFT was once popular, but the market cooled down later. How do you view this phenomenon?

Weng Xiaoqi: The popularity of NFTs to some extent was a misconception of the traditional collecting world entering the crypto field, with many traditional collectors entering the coin circle for scams, leading to a short-term market bubble. However, the applications native to the Crypto world are the ones with long-term value. In the future, as more applications with actual value land, Web3 will enter a new development stage.

DeThings: So, is the industry's discussion more focused on how to effectively integrate blockchain with other industries?

Weng Xiaoqi: Yes. What we can look forward to in the future is the widespread application of blockchain technology, so that ordinary users can have blockchain-related applications on their phones. This will be a turning point in the industry's development, similar to the explosion of the Internet in the early days. The Internet experienced a bubble from 2000 to 2003, with many people going public with just a PowerPoint, but as the bubble burst, the true value of the Internet industry gradually emerged. I believe that Web3 is currently in a similar early stage.

DeThings: If we compare it to web2, at what stage of development is Web3 currently at?

Weng Xiaoqi: The current development stage of Web3 is roughly equivalent to the early 2000s of the Internet, leaning towards the beginning stage. At that time, the infrastructure of the Internet was not yet complete, and many countries were discussing whether to ban the Internet, and today's Web3 is facing similar challenges. Although there are not yet many applications landing, the infrastructure is gradually being improved, and the potential of Web3 will gradually be unleashed.

After several upgrades, the on-chain performance of Ethereum is close to processing tens of thousands of transactions per second, and there are hundreds of thousands of nodes participating globally, similar to the broadband popularity in the early days of the Internet. We are currently in a stage where the technical infrastructure is gradually being improved, and the prospects for the explosion of applications are already evident.

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