Viewpoint Can Hong Kong’s full embrace of Web3 revitalize its economy?
Can Hong Kong's Full Embrace of Web3 Revitalize Its Economy? Exploring the Potential Impact on the Country's Economic LandscapeAuthor: Erchen Lu, Source: X, @erchenlu1
Can Hong Kong fully embrace “Web3” and revive itself to become a new financial technology center, revitalizing its economy?
The answer: highly unlikely.
In fact, many countries’ law enforcement costs in governing “Web3” criminal activities, as well as the financial investment losses of their residents in this field, far outweigh the contribution of the “Web3” industry to the local economy.
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Specific cases can be seen in FTX in Panama and the Luna Incident in South Korea.
The characteristics of blockchain, such as irreversibility of transactions, anonymity, and private key ownership control, make it an ideal breeding ground for criminals.
Currently, Coingecko and Coinmarketcap have listed tens of thousands of coins, and from the perspectives of today’s securities, financial and criminal laws, at least 99% of these coins involve fraud and other criminal activities.
If major banks collaborate too closely with “Web3”, they may face hefty fines related to money laundering and fraud, which far exceed their earnings.
Therefore, even if Hong Kong fully embraces “Web3”, major banks like HSBC and Bank of China will still have strict risk controls over transactions involving the cryptocurrency market, while only a few start-up banks like ZA Bank will be more friendly towards it.
For example, the most compliant fiat exchange Coinbase had a net loss of $2.6 billion in 2022.
In contrast, the profit of Hong Kong MTR was HK$9.827 billion ($1.258 billion).
Even in the year of the bull market in 2021, Coinbase’s profit was only $3.6 billion, which, compared to other US tech giants, had a limited impact on the US economy.
The “Web3” industry mainly involves exchanges, wallets, applications, and mining, with exchanges having the highest profits.
However, even if Hong Kong fully embraces “Web3”, the actual economic value of the “Web3” industry remains very limited after deducting governance costs, potential hefty fines in the financial industry, and the losses residents might bear.
The unique characteristics of blockchain make the space where “Web3” creates the greatest value mainly concentrated in the non-sovereign territory of the internet.
This is also one of the reasons why Uniswap’s trading volume often exceeds that of Coinbase.
For any specific country on the ground, its actual value is relatively limited, regardless of how the country claims to “embrace” “Web3”.**
In addition, countries such as Malta, El Salvador, and Hong Kong are undergoing similar narratives, but the results have not changed.
Note: Even after El Salvador’s official strong promotion of BTC for 1-2 years, the country did not truly benefit much from it economically.
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