Hong Kong eyes digital currency interoperability with mainland China

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Hong Kong could be extending its Web3 aspirations into mainland China as part of efforts to attract foreign-based firms to the city.

Hong Kong Legislative Council member Johnny Ng told Chinese news outlet The Paper that he expects greater collaboration between mainland China and Hong Kong in Web3 technologies in the coming years. Ng revealed that both jurisdictions could achieve Web3 interconnectivity through talent exchanges and linking up with digital currency service providers in Shanghai.

“There are also digital asset exchanges in Shanghai. I wonder if these exchanges that are licensed in Hong Kong for virtual asset trading can be interconnected with Shanghai’s exchanges in the future,” Ng said. “I really hope there will be discussions on these aspects in the future.”

Ng believes that Shanghai holds the final piece of the puzzle for interoperability between China and Hong Kong, citing existing financial relations between both regions. Currently, Shanghai and Hong Kong stock markets are linked via an innovative “Stock Connect” program, which Ng believes can be replicated in digital assets.

However, several factors stand in the way of Ng’s vision, including China’s blanket ban on digital currencies in 2021. China’s ban triggered a mass migration of Web3 talent, miners, and service providers from the country, and two years down the line, there are little to no signs of China lifting the ban.

Despite the blanket ban, non-fungible tokens (NFTs) trading has reportedly thrived in mainland China, with the government splurging on blockchain technology innovations. Several Chinese cities are keen on training blockchain experts to support the government’s push into new technologies.

Ng revealed that Hong Kong has a shallow talent pool that will need help to support its grand Web3 ambitions.

“We hope to cooperate with the Greater Bay Area and mainland cities to improve the flow of talents, and promote Hong Kong’s policies and advantages by organizing different activities,” Ng said. “We hope to attract mainland and overseas technical talents to come to Hong Kong to establish innovation and technology projects, so as to integrate with the real economy and scenarios.”

A number of Chinese banks has previously indicated an interest in offering banking services to incoming digital asset service providers in Hong Kong.

A flurry of activities in Hong Kong

Following the launch of a new licensing regime in Hong Kong, OSL and HashKey have received the first batch of licenses to offer digital asset services to their retail clients.

As more firms join the race for licensing, new data reveals that asset providers are spending up to $25 million to comply with Hong Kong’s requirements. Exchanges are strengthening their ranks with executives with the required experience and splurge on expensive office complexes and publicity.

The city expects over 80 international Web3 firms to set up operations in the coming months, urging local financial institutions to offer full banking services to the firms.

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