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Financial Secretary


Developing Web3 with innovation and steadiness

Many of you might have planned activities of various kinds for this long Easter weekend – meeting relatives and friends or taking a break from your hectic schedule. With a new round of consumption vouchers to be issued next Sunday and the upcoming “Happy Hong Kong” Campaign, the synergy between the two is expected to provide a new stimulus to the local retail and catering industries, thereby further reinforcing the momentum of our economic revival.

As our society returns to normalcy and our connection with the rest of the world fully resumes, we should seize this opportunity and go full steam ahead to open up new arenas and foster new strengths for the development of our economy with concerted efforts.

I have announced in this year’s Budget the three main directions of taking forward Hong Kong’s high-quality development. The digital economy and the application of the third generation Internet (Web3) indeed present great development potential, and we have received positive feedback from the society. In this week alone, at least four forums or festivals will be hosted in Hong Kong on Web3, digital economy and Fintech. Some of these events are anticipated to attract as many as over 10 000 physical participants.

On this Thursday and Friday, the HKSAR Government and Cyberport will co-organise the “Digital Economy Summit 2023”, with the theme of “Emerging with Resilience: Fostering a Smarter Future”. Participants include cross-sectoral business representatives from the I&T sector, Web3, financial sector, professional services providers, environmental protection industry, business and commerce, manufacturing industries and academia, etc. Six thematic forums will be held at the Summit on the future development trends of smart cities, data innovation, Fintech, artificial intelligence and big data, Web3, smart mobility and new industrialisation, coupling with the global and regional future I&T development analysis.

Another festival with the theme on Web3 will be hosted by industry players. This is the first time that the festival would be held in Hong Kong, reflecting that Hong Kong’s vision and development strategy for Web3 has aroused great interest from industry players. The event will focus on topics such as the development of Web3 and blockchain technology, the most popular Web3 applications and the related regulations in place worldwide, with a view to building up a collaborative platform for exchanges and the pursuit of progress in the frontier development of Web3 around the world.

This is going to be a busy week. A number of founders and senior managers of leading Web3 enterprises and startups will be gathering at the forums and festivals in Hong Kong. The participants include representatives who work in the fields of Web3 infrastructure facilities, trading platforms, virtual assets, e-wallet and payment tools, cyber security audit and the innovation and technology venture funds. Some industry players describe the series of events are comparable to a “tournament” hosted for IT masters to meet.

In fact, the global competition on Web3 development is deepening, with the focus on creating the greatest opportunity for application and innovation while ensuring the risks remain manageable. Whether the innovation is about making changes over existing approaches or making "disruptive innovations", the ultimate goal is to address pain points in real life and the real economy, to enhance efficiency and promote more inclusive development. For example, how to leverage tokenisation technology to solve the long-standing pain point of transaction transparency for the bond market and to facilitate the next stage of innovations in green finance; as well as to explore the use of blockchain technology to simplify the supply chain and the transaction processes of trading and to reduce costs, etc. When it comes to real-life application, there is much for us to do in deepening our explorations and leading new innovations.

Of course, the significant volatility in the virtual assets market over the past period and the recent collapses of virtual assets exchanges have caused some in the community to doubt the future of Web3. However, we think this is in fact the best time to promote the development of Web3.

Thinking back to the early 2000s, the world experienced a dot-com euphoria which ended in the bursting of a bubble. After this cycle, market participants became calmer. Besides, after the speculations ebbed, capable participants who remained would be more focused on competing on technological innovation, practical application and value creation, which contributed to improving the quality of the real economy. This is how the Internet technology industry has evolved.

I believe Web3 is going through the same process. In the coming stage, market participants need to develop blockchain technology in greater depths, enabling its features and advantages such as transparency, high efficiency, security, decentralization, de-platforming and low cost, to be applied in wider scenarios and tackle more pain points of existing business models and even break monopolies. This would enable users to share more widely the economic value brought by data, and bring leapfrog progress to the real economy.

To allow Web3 to continue its innovative path with prudence, we will adopt principles that place equal emphasis on both “appropriate regulation” and “promoting development”. Under appropriate regulation, apart from ensuring financial security and preventing systemic risks, we will continue to work on investor education and protection, and anti-money laundering/ counter-terrorist financing. Under the "same activity, same risks, same regulation" principle, we will first introduce a licensing regime for virtual asset service providers in June 2023 and then study the regulation of “stablecoins” to ensure the sustainable and responsible development of the virtual assets sector.

Separately, I have proposed to allocate $50 million to Cyberport in my latest Budget to expedite the development of the local Web3 ecosystem by, among other things, organising major international seminars, to enable the industry and enterprises to better grasp frontier development and to promote cross-sectoral business co-operation, as well as arranging a wide array of workshops for young people.

There is no easy road to innovation and technological reform. Even if we have identified the direction for development, we still have to chart our way forward, advancing steadily step by step. Only with the resolve to keep trying can we find new solutions and new ways out. It is my hope that the large-scale forums to be held next week will allow participants to have more in-depth exchanges and brainstorming of new ideas for the development of digital economy and Web3, thus enabling us to explore the practical approach to be adopted in future in a more forward-looking and specific manner and helping us forge ahead prudently in new arenas and new areas through innovation and steadiness.

April 9, 2023

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