Hong Kong Legislative Council releases “Development of Selected Places with Web3.0 Technology” (Full Text)

Hong Kong Legislative Council releases full text of "Selected Place Development with Web3.0 Technology".

1. Introduction

1.1 Web 3.0 refers to the third generation of the World Wide Web, and represents a decentralized and more open network world that opens up more possibilities for users. The development of Web 3.0 is driven by a series of advanced technologies and related applications, including blockchain technology, smart contracts, virtual assets (such as cryptocurrencies), non-fungible tokens (NFTs), and metaverse technology. These technologies/applications provide the necessary infrastructure for decentralized networks in technology, finance, and other major aspects, allowing users to interact directly without the need for any intermediary platforms. Compared with Web 2.0, Web 3.0 is undoubtedly a major leap forward, as the world of Web 2.0 is dominated by a few tech giants and requires transactions to be conducted through intermediary platforms (such as shopping websites and banks).

1.2 The Hong Kong government is committed to promoting the development and application of Web 3.0. In the 2023-2024 budget, the Financial Secretary announced that efforts will be made to accelerate the construction of Hong Kong’s Web 3.0 ecosystem, and a dedicated development team will be established for one of the aspects of Web 3.0, virtual assets. However, there are concerns that the development of local Web 3.0 lags behind other places. This is because many places around the world, especially in Asia and the Gulf region, have launched a series of measures to accelerate the development of Web 3.0 and related technologies/applications. In addition, given the recent turmoil in the cryptocurrency market, some believe that Hong Kong’s focus should not be limited to financial services and virtual assets, and that it should actively promote innovation in other areas of Web 3.0 technology, including blockchain and metaverse technology.

1.3 In response to the request of Councilor Wu Kit-ching, the Research Division has conducted research on the leading areas for the development of Web 3.0 technology/applications and the strategies they have adopted. This study will focus on the experiences of Japan, Singapore, South Korea, and the United Arab Emirates (“UAE”), as these places have taken an active stance in developing Web 3.0 technology and are now among the global or regional innovation hubs. Among them, Japan has formulated high-level policy guidance for the development of Web 3.0 and established a dedicated office to enhance coordination of Web 3.0 policies among government departments. In contrast to Japan’s approach of formulating comprehensive strategies to lead the development of Web 3.0, other places covered in the study focus on developing one or more specific areas of Web 3.0. For example, Singapore and the UAE are actively exploring the application and practice of blockchain technology through collaboration with the industry and/or the establishment of incubation centers, while South Korea is actively launching metaverse strategies to stimulate innovation in multiple sectors such as public services, culture, and tourism.

1.4 This summary first discusses the main characteristics, basic technologies and applications of Web 3.0, and then outlines the recent development of Web 3.0 in Hong Kong. The article then analyzes the situation of selected places to develop Web 3.0 and related technologies/applications, including examining Japan’s approach to formulating a comprehensive strategy, and other local initiatives to promote application-based initiatives, including (a) Singapore and the UAE’s measures to develop blockchain technology and/or asset tokenization, and (b) Singapore, South Korea and the UAE’s measures to develop metaverse technology.

2. Basic features of Web 3.0

2.1 Although the invention of the World Wide Web is considered one of the greatest technological breakthroughs in human modern history, the online world is still evolving. By the mid-2010s, the concept of “Web 3.0” emerged, describing an Internet/network space with the following characteristics, which is vastly different from the previous first and second generation of the Internet: [The World Wide Web has gone through three major development stages since the mid-1990s, please refer to Appendix 2 for details.]

(a) Decentralized: Decentralized networks are the core principles of Web 3.0. In the Web 3.0 era, data created by users is stored in different places on computer networks through technologies such as blockchain, rather than being centrally stored in databases owned by large technology companies, allowing users to better control their data, privacy, and digital identity [please refer to World Economic Forum (2022), Ejeke (2023), and Grant (2023)].;

(b) Open and interoperable: Web 3.0 applications are usually developed by developer communities and written in open-source software, enabling different systems and platforms to seamlessly collaborate on decentralized networks [please refer to the same as above]; and permissionless and trustless: Anyone can participate without the need to obtain permission from governance institutions such as service providers, so even without trusted third-party intermediaries such as banks and brokers, users can still interact and conduct transactions with each other.

2.2 Under the fusion development of various cutting-edge technologies, Web 3.0 is realized in a decentralized network world, but there is still no recognized standard definition for Web 3.0. Figure 1 highlights the various disruptive technologies and applications that provide the foundation for the development of Web 3.0, and the selected locations for this study are dedicated to the development of these technologies/applications.

3. Development of Web 3.0 Technology in Hong Kong

3.1 Like many other places around the world, Hong Kong is in the early stages of Web 3.0 development, with government-led policy driving development. In the 2023-2024 budget, the government emphasized that Hong Kong must seize the “golden opportunity” of developing Web 3.0. To this end, the government will allocate HKD 50 million to accelerate the development of the Web 3.0 ecosystem. Measures include organizing international conferences to promote cross-sector business cooperation and hosting youth workshops. [See Budget (2023) for details.] In addition to confirming that virtual assets are an important part of the Web 3.0 ecosystem, the budget also announced the establishment of a virtual asset development task force led by the Financial Secretary to bring together members from relevant policy bureaus, financial regulatory agencies, and the industry to submit recommendations to the government on the development of virtual assets (for details on the development of virtual assets in Hong Kong to date, please see paragraphs 3.4 to 3.7 below).

3.2 In the early 2020s, Hong Kong was particularly active in the development of Web 3.0. For example, the government completed four blockchain pilot projects in 2020, covering four areas: facilitating trademark transfer, optimizing the preparation process for environmental impact assessment reports, enhancing the traceability of pharmaceutical products, and monitoring the archiving records of companies, in order to explore the feasibility and benefits of applying blockchain technology to different e-government services. The government further launched a shared blockchain platform in June 2022, and will follow up with the development of more common services and reference program modules to assist policy bureaus/departments in developing more blockchain applications. [See Office of the Government Chief Information Officer (2022) for details.]

3.3 Cyberport, as Hong Kong’s flagship institution for digital technology and an important center for financial technology innovation, also established a “Web3 Hub” in January 2023, which aims to recruit international Web 3.0 companies to settle in Hong Kong in addition to supporting local innovators. [ Cyberport is managed by Hong Kong Cyberport Management Company Limited, which is wholly owned by the Hong Kong government. Web 3.0 start-ups that settle in Cyberport can be divided into three categories: financial technology, smart life, and digital entertainment/e-sports companies. Please refer to Cyberport (2023). ] The current Web 3.0 start-up community in Cyberport has already begun to take shape; as of late November 2022, about 80 blockchain or virtual asset companies have settled in Cyberport.

3.4 Given that Hong Kong is one of the world’s international financial centers, the development of Web 3.0 in the field of financial services is particularly prosperous. In October 2022, the government issued a policy statement clarifying its vision and policy of promoting the “sustainable and responsible” development of the virtual asset industry. [ Please refer to the Hong Kong Special Administrative Region Government (2022a). ] Due to recent turbulence in the cryptocurrency market and the increasing global demand for improved industry regulation, the government is particularly keen to strike an appropriate balance between supporting financial innovation, reducing risks, and protecting investors.

3.5 Regarding the regulation of virtual assets, the “Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022” (“AML Ordinance”), which was passed in December 2022, introduced a new licensing regime for virtual asset exchanges, which stipulates that such exchanges must be supervised by the Securities and Futures Commission (“SFC”). The new regime came into effect in June 2023, replacing the opt-in regime that had previously not required virtual asset exchanges to apply for a license. The AML Ordinance stipulates that the regulatory requirements that relevant operators must comply with are similar to those of traditional financial institutions, including complying with anti-money laundering/counter-terrorist financing regulations and other investor protection criteria, such as prudently safeguarding client assets and avoiding conflicts of interest. In addition, licensed persons are required to submit their audited accounts to the SFC on a regular basis, and the SFC also has the power to enter their business premises for inspection when necessary. [ Please refer to the Hong Kong Special Administrative Region Government (2022b). ]

On January 2023, the Hong Kong Monetary Authority (“HKMA”) issued its consultation conclusion on regulation of stablecoins [HKMA proposed to establish a regulatory regime on stablecoins for their use as payment, including requirements such as full backing by relevant assets and redeemability at face value, and licensing conditions on ownership, governance, anti-money laundering/counter-terrorism financing, and disclosure. See Hong Kong Monetary Authority (2023).] and is now developing a regulatory framework for further public consultation this year. In addition, the Securities and Futures Commission has finalized rules and measures on how to allow retail investors to invest in virtual assets in a moderate manner under the new licensing regime and how to protect investors. [Prior to this, the Securities and Futures Commission consulted on this matter in early 2023 and concluded in May 2023 that retail investors can buy and sell “eligible large-cap virtual assets” on licensed virtual asset trading platforms that are included in at least two “recognized indexes” introduced by at least two independent index providers. The Securities and Futures Commission also announced that it will implement appropriate measures to enhance investor protection, including requiring relevant exchange operators to ensure suitability and compliance with token inclusion criteria and other disclosure obligations in establishing business relationships with clients. See Securities and Futures Commission (2023).] In October 2022, the Securities and Futures Commission approved the public offering of exchange traded funds for trading on virtual asset futures exchanges in Hong Kong. [See Securities and Futures Commission (2022).] Given the unique nature of virtual assets, which differ from traditional assets, the government also maintains an open attitude towards reviewing the ownership of tokenized assets and the legality of smart contracts in order to provide a legal basis for relevant developments in the future.

3.7 In addition to regulatory considerations, the government has launched pilot projects to promote innovation and breakthroughs in the digital and virtual asset sectors. The successful launch of the first batch of HKD 800 million worth of tokenized green bonds in February 2023 is an example of such a bond issuance program, aimed at testing whether Hong Kong’s financial and legal infrastructure can be adapted to handle the entire bond issuance cycle (from issuance to settlement and redemption), and providing a reference model for future bond issuances using DLT.

Key Issues

3.8 Despite the government’s efforts to develop Web 3.0 in recent years, concerns have been raised in society that Hong Kong’s development momentum lags behind others, especially given the increasing efforts of competitors in the region and beyond to promote the application of Web 3.0 technologies. In this regard, there have been suggestions to urge the government:

(a) to formulate a blueprint for the comprehensive development of Web 3.0, with a focus on nurturing talent and startups. [See P. Kwok (2023).] In addition, it has been suggested that the government should make strategic investments related to Web 3.0 technologies through the newly established Hong Kong Investment Management Limited. [In the 2022 Policy Address, the government announced the establishment of Hong Kong Investment Management Limited to make strategic use of fiscal reserves to promote local targeted industries and economic development. See HKSAR Government (2022d).];

(b) to actively explore various Web 3.0 technologies, such as blockchain-based applications (including DeFi and smart contracts), as Web 3.0 has broad potential applications beyond virtual assets. [See D. Qiu and Sing Tao Daily (2023).];

(c) to establish a clearer legal framework for new trends brought about by Web 3.0 technologies, including the emergence of DAOs and issues of intellectual property arising from the use of NFTs. [Examples of legal issues that need clarification include: how to determine whether someone is qualified to issue an NFT if they only own a part of the original work; and whether copyright should be granted to artificial intelligence, given that it creates works after being developed and trained by humans. See China Daily (2022) and Now Finance (2022).]

(d) Draw on experiences from other places to catch up with the development of the metaverse and explore its applications in public services, tourism, and other industries. [See Think Hong Kong (2022) and HKSAR Government (2022e).]

4. Development of Web 3.0 Technologies in Different Places

4.1 Policymakers around the world are increasingly recognizing the potential of Web 3.0 and are promoting related technology development projects. The governments covered in this study have different policies for promoting the development of Web 3.0. Japan, for example, has a comprehensive Web 3.0 strategy led by the government at the policy level (see paragraphs 4.2 to 4.3 below). Other places such as Singapore, South Korea, and the UAE focus on developing one or more specific areas of Web 3.0, such as DLT/blockchain (paragraphs 4.4 to 4.8) and metaverse technology (paragraphs 4.9 to 4.15). The following paragraphs will discuss the main features of different place’s development strategies.

Comprehensive Web 3.0 Policy

4.2 In Japan, more and more people believe that the country should use Web 3.0 and related technologies/applications as the next development area, so as to re-establish its status as an advanced technology power on the world stage. [See Liberal Democratic Party (2022).], [For example, Japan has been a pioneer in the global virtual asset market and one of the earliest places to regulate cryptocurrencies. It has implemented multiple measures to strengthen investor protection and ensure the clarity of regulatory frameworks. Regarding the latter, the government introduced a registration system for cryptocurrency service providers in 2017, and required service providers to store not less than 95% of customers’ cryptocurrency in offline cold wallets to prevent hacking and fraudulent activities. See Financial Services Agency Japan (2022).] The advanced functions of Web 3.0 have become a key element for Japan to enhance its productivity [See Črešnar and Nedelko (2017).], which helps the country overcome the challenges of rapidly aging population and labor force contraction, thus maintaining economic growth. In fact, the ruling party of Japan, the Liberal Democratic Party, has established a dedicated project team under its “Headquarters for the Promotion of a Digital Society” [The project team was established in January 2022, initially focusing on NFT-related work. The team was reorganized into the “Digital Society Promotion Council” in October 2022.]

The Web3 project team under the Digital Promotion Council of Japan, a government organization “promoting the construction of a digital society,” is researching the development of Web 3.0 technology as Japan’s growth strategy. In April 2022, the team published the “White Paper on Japan’s NFT Strategy for the Web 3.0 Era,” making recommendations for a number of reform policies and legal frameworks to adapt to the evolving Web 3.0 economy.

The main recommendations include:

(a) Providing high-level policy guidance: The White Paper recommends the appointment of a minister dedicated to handling Web 3.0 matters and the establishment of a cross-ministerial agency within the government to enhance policy coordination and implement the national development strategy for Web 3.0;

(b) Educating the industry about NFTs: Although Japan has a large amount of intellectual property content in games and animation, some content holders remain hesitant to join the NFT market due to a lack of understanding of their rights as NFT holders. To address this, the White Paper recommends creating a common template of license terms and setting up consultation stations and information sessions to respond to queries and concerns related to NFT ownership and intellectual property;

(c) Establishing the legal status of DAOs: In addition to confirming that DAOs are a new governance model in the Web 3.0 ecosystem, the White Paper urges the government to clarify the legal status of DAOs and the rights and responsibilities of their participants under Japanese law. The White Paper further recommends following the example of places like the U.S. state of Wyoming in allowing DAOs to be registered legally in Japan. Since 2021, Wyoming has allowed DAOs to register in the state as a special type of limited liability company. Relevant laws also impose additional requirements on DAOs, such as the need to have a registered agent in the state and to include the term “DAO” in their registered name.

Identifying the wording “DAO LLC”. See State of Wyoming Legislature (2021).

Attracting talent: In the global competition for Web 3.0 talent, the White Paper encourages the government to issue special visas (also known as crypto visas) to top talent who are proficient in Web 3.0 technology to attract more talent with relevant knowledge and skills to settle in Japan. The White Paper also recommends tax reform, including a reduction in the tax rate on profits from cryptocurrency transactions, to attract Web 3.0 enterprises and investors to settle.

Furthermore, Japan has established a policy office dedicated to Web 3.0 (“dedicated office”), which is responsible for improving Web 3.0 development and related business environment, and is one of the first of its kind in the world. The dedicated office was established in July 2022 and is under the Ministry of Economy, Trade and Industry, serving as an “internal cross-departmental organization” of the government, bringing together all relevant departments involved in Web 3.0 development, including agencies in the fields of industrial financing, taxation, media content, sports and fashion. See Ministry of Economy, Trade and Industry (2022). In the first stage of its work, the dedicated office collects data from relevant stakeholders such as business operators, investors, and legal professionals to understand the business challenges faced by the Web 3.0 industry. In addition to establishing a policy office, legislation related to Web 3.0 is expected to be submitted to the Diet for deliberation within 2023, with the emphasis on tax reform for cryptocurrency assets and the legal status of DAOs. See Morrison Foerster (2023). The Japanese government is reported to have established its own DAO for research on the actual operation and role of DAOs in the Web 3.0 ecosystem, allowing policy makers to gain a deeper understanding of the benefits and challenges of granting legal status to DAOs. See CoinGeek (2022).

Exploring the application of blockchain technology and/or asset tokenization

# 新加坡金融服務相關應用4.4 Singapore, as a regional and international financial center, is actively promoting the construction of a “innovative and responsible” digital asset ecosystem [Singapore defines digital assets as “any valuable asset whose ownership can be recorded digitally or in a computerized manner”. According to this definition, financial assets (such as cash and bonds) and physical assets (such as property) can be tokenized and become digital assets. Refer to the Monetary Authority of Singapore (2022d).], striving to bring innovative projects to the financial services industry rather than promoting speculative activities. [Singapore has been tightening regulations on cryptocurrencies, including restricting retail investors from trading cryptocurrencies and banning the promotion of high-risk products to the public. In October 2022, the Monetary Authority of Singapore issued two consultation papers proposing (a) to restrict retail investors from using credit tools or leverage to buy cryptocurrencies; and (b) to require retail investors to complete a risk awareness assessment before participating in trading. In addition, the authorities plan to regulate the issuance of stablecoins with a circulation value exceeding SGD 5 million (HKD 29 million) and pegged to a single currency.] In this regard, Singapore is focusing on fully leveraging the transformative potential of DLT and asset tokenization, and is committed to vigorously promoting innovative initiatives in related fields:**DLT**(a) To explore the potential of using DLT for cross-border payments and settlement, Temasek (Singapore’s sovereign wealth fund) and two commercial banks have formed a commercial joint venture, which uses a multi-currency wholesale settlement and delivery platform based on DLT to shorten the settlement time for Singapore dollar and US dollar transactions from days to minutes [Refer to the Monetary Authority of Singapore (2022d).];

Tokenization of Assets

(b) Another joint venture between Temasek and Singapore Exchange is exploring the application of tokenized assets in the capital markets, with the aim of accelerating settlement and clearing of securities trading. The bond issuance platform built on blockchain technology not only digitizes the manual process, but also achieves a completely “paperless” process, shortening the settlement time for new bond issues by 60% to two days. [See Singapore Exchange Group (2022).]; and

(c) In May 2022, the Monetary Authority of Singapore (MAS) launched Project Guardian to lead the evaluation of use cases for tokenized financial and real economy assets. Project Guardian is a collaborative effort between MAS and traditional financial institutions and/or fintech companies, aimed at testing the feasibility of four broad areas of application: (a) using public blockchains to build open, interoperable networks for digital asset trading across platforms and liquidity pools; (b) using independent trust anchors to verify participants’ credentials [Trust anchor entities, regulated financial institutions, are responsible for screening and issuing verifiable credentials to entities intending to participate in DeFi protocols. This ensures that participants only transact with verified counterparties, issuers, or protocol developers. See Monetary Authority of Singapore (2022b, 2022c).]; (c) facilitating the tokenization of assets; and (d) introducing regulatory safeguards in DeFi protocols to counteract market manipulation. [DeFi protocols are codes, procedures, and rules that regulate how digital assets are used on a blockchain network. See Monetary Authority of Singapore (2022b, 2022c).]

4.5 Specifically, the first industry pilot project under Project Guardian aims to explore

DeFi’s prospects in the wholesale financing market have been demonstrated by the completion of the first real-time transaction in November 2022. The pilot project successfully conducted real-time cross-currency transactions involving tokenized deposits denominated in Japanese yen and Singaporean dollars, as well as trading tokenized government bonds, demonstrating Singapore’s ability to handle direct real-time settlement and delivery between participants, with reduced settlement costs. [See Monetary Authority of Singapore (2022a).] Building on this experience, the Monetary Authority of Singapore is introducing two new industry pilot projects to expand the use of tokenized assets in areas such as trade finance and wealth management. [One pilot project explores tokens linked to trade finance assets, while the other aims to realize digitally issued wealth management products locally.]

United Arab Emirates-Government Services and Other Applications

4.6 The UAE is exploring the extensive use of Web 3.0 technology on multiple fronts and taking a proactive approach. Initiatives include: (a) adopting blockchain technology in applicable government services; (b) creating an ecosystem conducive to supporting the construction of blockchain industries to support startups and other businesses; and (c) establishing an international leadership position in blockchain technology. In 2018, the UAE launched its Emirates Blockchain Strategy nationwide, covering four pillars, with a focus on happiness, government efficiency, advanced legislation, and global entrepreneurship. The strategy also sets an ambitious target to transfer 50% of government transactions onto blockchain platforms by 2021 or earlier. [See Government of UAE (2023a).] Dubai, the most populous emirate, was the first to launch a Blockchain Strategy in 2016. [There are seven emirates in the UAE. In order to become a hub for the global Web 3.0 and metaverse, the Dubai government has formulated a Blockchain Strategy, with government efficiency, industry development, and international leadership as its three pillars.]

Since the United Arab Emirates (UAE) established its blockchain strategy at the national and emirate levels, approximately 200 projects have emerged locally, involving over 40 government agencies and 120 companies. [See World Economic Forum (2020).] For example, the UAE’s Ministry of Health and Prevention has partnered with a local healthtech company to launch a platform using blockchain technology since 2019 to improve organ matching and verification of donated organs, thereby eliminating illegal organ trafficking. The platform is estimated to save the government more than US$20 million (HK$157 million) in dialysis treatment costs annually. [See same as above.] Another project launched by Dubai’s Roads and Transport Authority uses blockchain to track the lifecycle of vehicles, including sales and accident records, to prevent transaction disputes involving vehicles by increasing information transparency. [See Government of UAE (2023a).] In addition, to speed up the clearance of e-commerce, Dubai Customs has established a platform supported by blockchain technology in an effort to automate customs clearance procedures and tax exemption applications when returning goods. It is reported that DHL and other major e-commerce companies are users of the platform. [See World Customs Organization (2020).]

Another important strategy of the UAE is to attract investment and cultivate and recruit Web 3.0-related startups. In order to explore more promising practical blockchain projects, the Dubai government has held the global blockchain challenge from 2017 to 2019, inviting 20 blockchain startups each year to showcase their innovative solutions. In addition to cash prizes, winners have the opportunity to attract venture capital and collaborate with government partners. [In 2019 alone, the challenge received more than 700 applications from 79 countries. Please refer to

Digital Dubai (2021). In the process of developing blockchain in the UAE, the incubator center also played a key role. One notable example is the Crypto Center established by the Dubai Multi Commodities Centre (DMCC). DMCC is one of the largest free trade zones in the UAE, providing tax and other incentives for businesses to set up shop. [The UAE has more than 40 free trade zones specifically designed for certain industries and provide a range of incentives for foreign investors, including tax-free arrangements for individuals and companies and allowing for wholly foreign-owned companies to be established.] The Crypto Center in the zone was launched in May 2021 and is positioned as a hub for cryptocurrency and blockchain technology. In addition to using shared workspaces and participating in various incubator and accelerator programs, resident companies also have the opportunity to receive funding from a $150 million (HKD 1.2 billion) accelerator fund. [See Dubai Multi Commodities Centre (2022).] The center also collaborates with CV Labs, based in Switzerland. CV Labs is the driving force behind the Crypto Valley project of the Swiss government, which has so far incubated blockchain unicorns such as Ethereum and Cardano. [See Dubai Multi Commodities Centre (2021).] It provides consulting services, business networking events, and blockchain and entrepreneurship training for resident companies. As of January 2023, more than 500 companies are based in DMCC’s Crypto Center, making it the largest concentration of cryptocurrency and blockchain companies in the Middle East. [See Dubai Multi Commodities Centre (2023).] Other free trade zones in the UAE are also working to catch up with DMCC, with the Abu Dhabi Global Market recently announcing a $2 billion (HKD 15.7 billion) funding program to nurture blockchain and

Startup for Web 3.0. [More details are expected to be announced by the authorities at an appropriate time. Please refer to Abu Dhabi Global Market (2023).]

Promoting the Development of Metaverse Technology

4.9 In addition to encouraging the development of blockchain technology, some selected places in this study have also increased investment in the development of the metaverse. It is estimated that by 2030, the global metaverse market will reach a scale of $5 trillion (HK$39 trillion). [Please refer to McKinsey & Company (2023).] In this regard, the UAE and South Korea, as pioneers, have formulated clear and comprehensive metaverse strategies, and have also fully utilized related technologies to develop metaverse platforms to provide public services. As for Singapore, the local government has not yet officially announced any government strategy to guide the development of the metaverse, but is actively trying to apply metaverse technology to the development of tourism.

The UAE

4.10 Dubai’s metaverse strategy launched in July 2022 aims to make the emirate one of the world’s top ten metaverse economies. According to the conceptualization of the strategy, by 2030, the metaverse industry will not only contribute $4 billion (HK$31 billion) to Dubai’s economy, but also provide approximately 40,000 virtual jobs, and improve the productivity of professionals such as surgeons and engineers through metaverse technology. [Please refer to Government of Dubai Media Office (2022b).] The key points of the strategy include [Please refer to Government of UAE (2023b).]:

(a) Promoting innovation—by promoting R&D cooperation projects to promote innovation, and using accelerators and incubators to attract metaverse companies and projects to settle in Dubai;

(b) Cultivating talent—investing in metaverse education, and focusing on developers, content creators, and metaverse users.

(c) Develop Web 3.0 technology and related applications – the goal is to create new government work models in major areas such as tourism, education, retail, law, and medicine.

4.11 In addition, Dubai’s Virtual Assets Regulatory Authority (VARA) [VARA was established in accordance with Dubai Law No. 4 of 2022, and is primarily responsible for regulating, supervising, and administering virtual assets and related service providers throughout the Emirate of Dubai, but excluding the Dubai International Financial Center.] became the world’s first regulatory agency to enter the metaverse in May 2022, and purchased land in the virtual world The Sandbox to open its metaverse headquarters. According to the regulatory agency, this move represents VARA’s efforts to “get closer to the regulated industry and ensure access to relevant stakeholders in an environment where the industry operates.” [Please refer to Government of Dubai Media Office (2022a).] According to VARA’s data, its metaverse headquarters will provide channels for potential license applicants to begin the application process, and provide resources for other stakeholders to understand VARA’s regulatory measures.

4.12 As Dubai leads the development of the metaverse in the UAE, other UAE government agencies are also following suit, including: (a) the Ministry of Economy has announced plans to establish a metaverse office, which complements physical offices and provides 24-hour service to clients, as well as virtual venues for events and signing agreements [Please refer to Dubai Future Foundation (2022)]; and (b) the Emirates Health Services will use 3D virtual reality technology to improve the effectiveness of virtual diagnosis and remote medical programs.

South Korea

4.13 The innovative development of the metaverse is seen as one of the driving forces behind the booming cultural and entertainment industries in South Korea. The Ministry of Science and Information & Communications Technology announced its metaverse strategy in early 2022, with a budget of KRW 223.7 billion (HKD 1.3 billion), to complement the government’s Digital New Deal 2.0 policy, which aims to achieve digital transformation to accelerate economic recovery after the pandemic. Its metaverse strategy mainly includes [Please refer to the Ministry of Science and Information & Communications Technology (2022a, 2022b)].

(a) Activate the metaverse ecosystem by investing in education, manufacturing, and healthcare-related metaverse projects;

(b) Establish a metaverse academy to train young developers and creators, and hold events such as competitions and hackathons to discover metaverse talent;

(c) Provide facilities for small companies and startups in the industry to conduct new product testing and application demonstrations, and support the commercialization of AR/VR and other immersive technologies to foster metaverse companies; and

(d) Build a secure environment for metaverse users, particularly by establishing a cross-government metaverse commission responsible for studying legal issues related to personal data privacy and intellectual property protection, and setting up regulatory procedures for illegal activities in the metaverse.

4.14 At the city level, the “Metaverse Seoul” project by the Seoul government has made some progress. The project, which involves KRW 3.9 billion (HKD 23 million), was officially launched in January 2023 and is being implemented in stages to establish a “digital twin” of the South Korean capital. The current focus of the project is to improve various public services provided by the government through a public metaverse platform, including citizen complaints, tax consultation, youth counseling, and support for struggling businesses. [Additionally, users can explore cultural landmarks in the virtual city even from home through their virtual avatars. Refer to Government of Seoul (2023).] The subsequent stage of the project will expand the scope of public services that can be provided on the platform and incorporate AR/VR technology to manage the city’s infrastructure. The entire project is expected to be completed by 2026. [Refer to the same source and Forkast (2023).] Reports indicate mixed reactions to the project, with concerns raised about its cost and whether it is convenient for elderly users. [Refer to The Korea Times (2023) and TIME (2022).]

Singapore

4.15 Singapore Tourism Board is using metaverse technology to enhance the tourist experience, particularly in response to the impact of the pandemic. Measures include: (a) providing more than 100 3D models of Singapore’s iconic attractions to the tourism industry free of charge for them to develop AR, VR or other extended reality projects, providing an immersive experience for tourists; [See Singapore Tourism Board (2022a).] and (b) developing proof-of-concept projects, such as developing AR applications for aquariums, allowing visitors to interact with marine life digitally; and working with hotel groups to host events that allow participants to travel through the streets and alleys of Singapore in the metaverse and win prizes such as hotel and dining vouchers for use in physical venues. [See above and Singapore Tourism Board (2022b).] In addition, Singapore is planning to combine metaverse technology with some national tourism projects and events. For example, the city-state’s major tourist attraction, Gardens by the Bay, offers tourists an immersive metaverse experience, including a digital replica of the entire garden and a metaverse concert featuring Singaporean artists in virtual form. [See Gardens by the Bay (2022).] As for the Singapore Grand Prix in 2022, which is expected to attract about 250,000 spectators, a 3D AR car simulator is used to give viewers the experience of driving a race car at high speed. [See Singapore Tourism Board (2023).]

5. Conclusion

5.1 Web 3.0 is often referred to as a decentralized network, meaning that the online world has moved away from the centralized intermediary platform model, giving users greater autonomy and more control over their digital lives. DLT/blockchain technology is the core technology of Web 3.0 and is the cornerstone of multiple Web 3.0 technologies and applications, including virtual assets (such as cryptocurrencies), NFTs, DeFi, and smart contracts. The Hong Kong government has announced a number of measures to support the development of the Web 3.0 ecosystem, with a focus on the virtual asset market and related applications for other financial services. Some are concerned that Hong Kong’s development in other Web 3.0 technology areas has not been ideal, resulting in falling behind its competitors in Asia and the Gulf region, which are leveraging their own advantages and potential to develop Web 3.0 and expand its application scenarios.

5.2 In order to consolidate its position as a global innovation powerhouse, Japan is formulating comprehensive policy support for the development of multiple Web 3.0 areas, including adjustments to its policy and legal framework to accommodate the changes brought about by Web 3.0 technologies, such as NFTs and emerging DAO corporate structures. Although related legislation has not yet been enacted, Japan has accelerated the pace of reform through the establishment of a dedicated Web 3.0 office to enhance policy coordination among government departments.

5.3 Elsewhere outside of Japan, other places are focusing on developing one or more specific areas of Web 3.0 in response to their respective competitive advantages and policy objectives. For example, Singapore is exploring the application of DLT/blockchain technology in finance, while the UAE is focusing on implementing a number of blockchain-related initiatives to improve government efficiency, promote industry development, and establish a leading position in the Web 3.0 field. South Korea and the UAE’s Dubai Emirate are among the first governments to formulate immersive metaverse technology development strategies.

5.4 Most of the research covering the above-mentioned policy measures published by various places is still in the planning or early implementation stages, or requires some time to determine their results and effectiveness. However, the experiences of these pioneers may provide policy guidance for Hong Kong’s development of Web 3.0 technology/applications.

Research and Information Division, Legislative Council Secretariat

Lu Kin-han

14 June 2023

Tel: 3919 3181

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