SEP 20, 2023
Interview with Qiu Dageng: The advocate of "Three Arrows, Three Circles" explains Hong Kong's latest virtual asset policy
by 吴说猫弟, WuBlockchain
Interview with Qiu Dageng: The advocate of "Three Arrows, Three Circles" explains Hong Kong's latest virtual asset policy
Interviewed | Foresight News，PANews
Compile | WuBlockchain
Since the release of the "Policy Declaration on the Development of Virtual Assets in Hong Kong" last October, Hong Kong has taken a series of measures to promote the steady growth of the virtual asset industry. Recently, Hong Kong has made significant advancements in digital Hong Kong dollars, digital stablecoins, and asset tokenization, thanks to the support of experts from academia, business, and politics. Wu Jiezhuang, Qiu Dageng, and Huang Jinhui are three key legislators promoting Hong Kong's new cryptocurrency policies.
Foresight News had an exclusive interview with Qiu Dageng during the Shanghai Wanxiang Blockchain Week. Reportedly, Qiu Dageng is a member of the Hong Kong Legislative Council (Technology Innovation sector). He had just flown from Singapore's TOKEN2049 summit to attend the Shanghai Wanxiang Blockchain Week and was interviewed by both Foresight News and PANews. The following is the full interview:
Foresight News: Why are you personally interested in Web3, and how do you see its combination with Hong Kong?
Qiu Dageng: I'm an investor and have been involved in venture capital. I started paying attention to cryptocurrencies as early as 2012-2013. If it's just cryptocurrencies, it seems like a rather singular market. However, given the recent growth trajectory, the development of Web3 is not just about cryptocurrencies. All financial products, personal data, and new directions on the internet can be based on blockchain for advancement. I believe this breadth is enough for various investors to participate.
The development of Web3 now is somewhat reminiscent of the internet around 2002-2003, just coming out of the bubble phase. The internet experienced a bubble in 2000, and during its "winter," the infrastructure gradually improved. Many large, high-quality companies emerged post-bubble, like Amazon and Alibaba. The same is true for Web3. We want to do a lot, but the underlying infrastructure is not yet ready. Many people are quietly working on this foundational infrastructure. Typically, technology doesn't mature in just a year or two; it might need 10 to 20 years. The real winners of Web3 might only be apparent in 5 to 10 years.
Foresight News: You proposed the "Three Arrows, Three Circles" policy recommendation to the Hong Kong government. How did you come up with this proposal, and why is it named "Three Arrows, Three Circles"?
Qiu Dageng: The "Three Circles" pertain to Web3. The first circle is about the government trying to issue its own currency, such as tokenizing some land. The second is accelerating the rollout of the digital Hong Kong dollar at the retail level. The third is promoting the development of the Hong Kong dollar stablecoin, suggesting that the commercial market issues the Hong Kong dollar stablecoin.
The "Three Arrows" actually support the overall economic development of Hong Kong in terms of investment, not entirely related to Web3. The "Three Arrows" aim to stimulate Hong Kong's investment environment from three perspectives. The first arrow is establishing a mother fund to attract venture capital institutions to Hong Kong for early-stage investment projects. The second arrow aims to attract companies with growth potential to Hong Kong through investment. The third arrow suggests reforms in the stock market, including reducing stamp duty and establishing a secondary market matching fund.
Foresight News: Xintian Technology City is becoming a secondary center of Hong Kong. You proposed supporting Xintian Technology City through token issuance. How can tokens solve the problems of Xintian Technology City?
Qiu Dageng: With the motto "South Finance, North Tech," Hong Kong's development in technology is mainly in the north. The main technological region in the northern urban area is Xintian Technology City. However, the development of Xintian Technology City is expected to be later than the He Tao area near Shenzhen, as Xintian still has a lot of land to be reclaimed.
Regarding land reclamation, I suggested to the government to issue asset-backed tokens (ABT) as compensation for land reclamation. In fact, many villages in private lands are collectively owned, with village committees deciding on land use post-reclamation. Village residents can vote based on their land holdings. This decision-making process is very similar to a DAO (Decentralized Autonomous Organization). Using tokens for reclamation aligns well with the original decision-making structure of these villages.
After tokenization, the first advantage is better management. For example, many villages in these areas have aged, and most people are no longer in Hong Kong. Their descendants might be in the UK, Europe, or Australia, making land management difficult. With tokenization, the government can guarantee land ownership using tokens, effectively using a DAO approach for operations, which is a better management method.
Secondly, if the government's own land is to be used for technological purposes in the future, the current method requires it to be auctioned publicly. If auctioned publicly, only local property developers in Hong Kong can participate, which is quite limited. However, if some of the land is tokenized, it allows more people from around the world to participate, reduces transaction costs, and eliminates the need for large auctions.
If the government is willing to use a small piece of land to create an asset-backed token (or ABT), it would be a financial innovation after the exchange. For the government, this also opens up a source of funding for land development.
Foresight News:As an investor, on which platforms can I hold this type of token? Will it be traded on existing virtual asset exchanges?
Qiu Da-gen:Which platform to trade on, whether professional or retail investors can trade, whether it can be freely traded, these are questions that need to be discussed. The key is whether the government is willing to take the lead. If the government takes the lead in tokenizing a piece of land, it can give confidence to the whole world. Many people who hold assets in Hong Kong can think of different tokenization schemes, thereby developing a richer range of stable and reliable financial products derived from Tokens in Hong Kong. If the exchange only trades virtual assets, it won't highlight the uniqueness of the Hong Kong exchange. If the tokenization of Hong Kong's land proves beneficial, maybe in the future, mainland and even overseas land assets can be brought to Hong Kong's exchange for fundraising. Once the ownership of the land has been verified, the tokenized land won't fluctuate as much as virtual assets and will become a new global fundraising method.
Of course, tokenized land assets will likely be traded on existing virtual asset exchanges, but there will also be other channels, such as traditional brokers and online stock trading platforms. They will also need to apply for licenses.
Foresight News:What benefits do you think the Hong Kong Dollar stablecoin will bring to Hong Kong, its companies and institutions, and its people?
Qiu Da-gen: I think stablecoins are important. First, stablecoins are our intermediate currency connecting to digital assets. Stablecoins are continuously breaking into our real lives, such as some stablecoins being used in targeted international trade, and some are integrated with internet products like Grab.
Second, for some of Hong Kong's business institutions, like banks, they can also benefit from participating in stablecoins, depending on how the stablecoins are developed.
Third, the public and investors don't like putting all their money in one basket. USDC, USDT, and other USD stablecoins are pegged to the US dollar. If the US dollar itself is unstable, it can cause significant losses for investors. The Hong Kong Dollar stablecoin can be a choice to diversify risks.
Foresight News:This time you also went to Singapore's TOKEN2049. How do you view Singapore's efficiency in promoting the integration of large institutions and cryptocurrencies? What do you think Hong Kong should learn from?
Qiu Da-gen:Singapore indeed has been ahead of us in promoting this in recent years, whether in terms of regulations or supervision. Recently, Singapore's stablecoin initiative also preceded ours. However, at the recent TOKEN2049, it seemed that the government's participation was not high. Events with the word "Crypto" were not allowed to be promoted in Singapore, and there was no government involvement.
I think Singapore is still promoting digital assets, including digital currencies, but is doing so more conservatively, fully in line with compliance. Hong Kong will definitely cooperate or learn more from Singapore in this field. Both are international financial centers. In promoting the next round of financial innovation, neither can slow down.
Hong Kong's signal to everyone is to definitely promote normalized development, regular financial innovation. Through Hong Kong's current regulations, some licenses have been issued, and different financial products will be launched in the future, showing that Hong Kong has licensed exchanges and compliant products.
PANews Reporter: Some people have questioned Hong Kong's policies. Vitalik believes that the sustainability of Hong Kong's policies is not as good as Singapore's. What challenges do you think Hong Kong faces in promoting Web3?
Qiu Dageng: Having just returned from Singapore, I believe Singapore focuses more on payments (Payment). Singapore's PSA license is mostly used for payments. However, when it comes to retail trading of virtual assets, it is strictly regulated, while institutional trading of virtual assets is relatively more relaxed, as long as KYC (Know Your Customer) is conducted. Singapore's policy towards individuals is not more open than ours.
In terms of overall planning, Hong Kong might be a bit slower than Singapore, but the policy directions are different. Recently, Hong Kong has caught up in areas like bank account opening. We're only about a year or two behind from a legislative perspective. Moreover, while Singapore is slowing down, we are advancing. In my understanding, the philosophies of Hong Kong and Singapore are quite similar, aiming to provide a compliant and reliable market within financial innovation.
PANews Reporter: Regarding the recent JPEX incident, are there any regulations for Hong Kong's crypto exchanges' operations before they obtain a license?
Qiu Dageng: Before the related law was implemented on June 1st, there was no restriction on operating a crypto exchange. However, after June 1st, if you haven't applied for a license, you can't operate a crypto exchange. But if you've applied for one, theoretically, you can operate until the government announces whether they grant licenses in March of the following year. This creates a gray area.
From June 1st to now, about three months, I have been communicating with some government departments, suggesting they disclose who has applied and who hasn't. Currently, they can only disclose those who have been granted licenses, because it's uncertain whether an applicant will ultimately get a license. Therefore, I suggest speeding up the approval process. For exchanges that clearly won't get a license, the government should notify them as soon as possible to reduce the time this gray area exists.
During JPEX's sales process, we have already received numerous complaints. So, there's a high likelihood it's either a pyramid scheme or operating illegally. However, the problem is, until a customer reports them to the police, without a victim, even if the government suspects them, they can't proactively ban their operations. Only when victims emerge and, based on evidence from reports, it is determined that there's a high probability they are involved in pyramid schemes or fraud, can the government prohibit their operations.
Such a situation does exist now. Therefore, the government should reduce the licensing time. Originally, these few months were given to operators to prove the feasibility of their businesses, but now some people take advantage of this period to engage in malpractices. The JPEX incident also educated the public. People should only trust exchanges with licenses. The government should further support licensed or legitimate businesses in Hong Kong and collaborate with Hong Kong regulators to develop new financial products.