We spoke to Alexandra Serebrennikova, Swisstronik’s marketing director and advisor, to gain insight into Hong Kong’s recent decisions to regulate crypto and stablecoins. Serebrennikova believes that Hong Kong is looking to become a leader in the crypto and Web3 space, so that it can play a major role in the future of global finance.
Question: What are the advantages of the new regulations in Hong Kong, which are generally seen as being “crypto-friendly”?
Alexandra Serebrennikova: At this stage, it’s important to shift to more serious use cases that are a part of our daily lives. To make that happen, we need an environment that is suitable for innovative startups, users, investors and other industry participants. Regulatory frameworks in Hong Kong and other states are helpful, but there are two other steps we can take to support sustainable growth:
- We need to balance the compliance procedures – KYC and AML checks – with user privacy and data security. Right now, these checks are done in a centralized way with little regard for user privacy, which is why some crypto companies are losing their market share to other companies that don’t follow these rules. However, more solutions for decentralized, private, and even monetizable KYC checks, like our own at Swisstronik, are available. This way, users can use safe compliant products while keeping their data private, and that’s when true adoption can come.
- We must create consistent legal frameworks between states. The crypto community is global, and most activities occur across borders. It’s essential to understand how these activities should be regulated. Today, crypto startups can choose between a few regulated countries to use as their base, but it’s still expensive and difficult to keep up with global regulations while staying fully compliant. We’re working on tools to address this issue.
Question: What prompted Hong Kong to open up to crypto?
Alexandra: There are three main reasons. First, the potential of using smart contracts is clear to traditional finance companies. Second, the launch of CBDCs requires the security and consistency of compliance in the cryptocurrency space. And third, the growth of the crypto industry is attractive to investors. Hong Kong is one of the first countries to establish itself as a crypto hub, so it stands a great chance of becoming the home of large crypto holdings and massive asset inflow.
Question: What do you think are the advantages and risks for Hong Kong in taking such a progressive approach to Web3?
Alexandra: The benefits are enhanced consumer protection and market integrity. But more importantly, Hong Kong is in line with very few other first movers, so it can harness the growth of the crypto sector and position itself as a financial hub for the Web3 era. It can also lead the way in global standard setting and affect the global financial system in the long run.
The main risk is the same for all pioneering jurisdictions: market fragmentation and barriers to cross-border activities. We’re working hard to solve this issue with tools that allow crypto apps to adapt to local laws while preserving user privacy and decentralization.
Question: If China becomes more crypto-friendly, what will it mean for the wider crypto industry, especially in the US where legislators have recently been less than welcoming?
Alexandra: I think that a country’s role in the global financial system in the future will depend on how quickly it joins the crypto market. China is already using digital yuan and crypto is popular there despite the official ban. I believe that soon, we’ll see more comprehensive regulations in China, though they will be much stricter than in Hong Kong. Therefore, Hong Kong can be looked at as a reference, but not as a model for Chinese legislation.
If China does become more crypto-friendly, it could have a major impact on the wider industry, especially in the US. However, the US should not be discounted. China is showing great potential in this regard, and we’ll have to see how it all plays out.
