top of page
背景 2_edited.jpg
  • Writer's pictureAmedeo Montonati

Update on the current Digital Assets ecosystem and trends in Hong Kong





Update of Crypto Market by AOGB
.pdf
Download PDF • 1.48MB

 

Global Overlook


What will happen starting from 2023 for crypto, nonfungible tokens better known as NFTs and digital assets as a whole? Because of the turbulence that has impacted the markets and the scandals that have hit once well-perceived companies, it’s more critical than ever for business leaders and investors to have insights into what the year ahead will hold.


The important aspect to take into consideration is that we observed such trend before. Disruptive new technologies often pass through a cycle of speculative excess but after the turbulence settles, businesses will likely transform and functioning regulations will emerge.


Analysts, overall, believe the crypto market will recover in 2023 and by the end of the year, the bulk of the bear market will be behind us; however, a full bull market, going by bitcoin price history, is not guaranteed.


It remains clear that the institutional adoption of digital assets, the convergence of traditional and decentralized finance, as well as the technology and governance controls will continue to be focus areas for this sector’s ecosystem.


We will see an exponential rise of regulation and regulatory systems, as now more than ever countries realized that are critical to supervise and avoid major crashes. This will bring a positive new breeze of businesses that will be focused on regulated and less risky activities which hopefully will re-establish the assurance in the investors.


Main Trend


An ongoing trend which most people believe will be the focus for 2023 is Tokenization – with a strong link to art and design.


The high fluctuation that NFTs have recently been affected to had the same root cause: too much focus on the asset value, which led to unsupervised and highly impulsive speculation. Unfortunately there was too little focus on the actual tokens, which can securely represent unique physical or digital objects and have the potential to provide real business utility.


The slow but steady re-bounce of NFTs will be most likely linked to the growth of Web3. Web3 is about ownership of one’s assets, facilitated by the blockchain, which can ensure that digital items are authentic and easily transferable. Web3 also introduces ways to compensate individuals for their time, data and input while permitting them to keep control of their data and assets.


Further to this link, a strong focus on the token themselves to be exchanged on the Web3 and blockchain in relation to physical assets will further develop the concept of Tokenization.


The concept of tokenization or managing traditional assets through wallet and blockchain infrastructure stands to promote both growth and inclusion in the financial markets. Towards the end of 2022, we saw major banks and institutions around the world launching or preparing to launch tokenized assets such as bonds, carbon credits and private equity funds.


So why is tokenization gaining the interest of financial institutions?


It mainly comes down to the numerous benefits that tokenization brings, including greater efficiency, thanks to automation and disintermediation, more transparency, increased liquidity, and faster clearing and settlement times.


As said above, Tokenization can represent physical actual assets such as art pieces, painting, design sculpture, installation and buildings. In this way you can reach a stage where you can have tradable percentage of the value of an actual physical object with all the benefits of the new technology.


While we are still in the nascent stages of tokenization and there is still much more progress to be made, financial institutions acknowledge that tokenization’s potential is enormous and this is likely an area where we will see huge strides being made next year.


In Hong Kong


Good news for Hong Kong.


The city in fact is strongly positioning itself as a main player for the industry around other jurisdictions. The Legislative Council of Hong Kong passed legislation that will soon open up virtual assets to retail investors, and local financial services are lining up for licensing approval.


Many think that regulations will drive away businesses but on the contrary a strong regulatory regime will actually attract investors and major industry’s players as will provide a better security and more controlled risks – something we recently saw being an important factor.


As such, the Hong Kong Monetary Authority plans to put in place an agile and risk-based regime for regulating certain financial activities that are related to stablecoins.


The HKMA in fact released a Conclusion of Discussion Paper on Crypto-assets and Stablecoins at the end of January 2023. *(See link below)


The Hong Kong’s body proposes to start with stablecoins, that can reference to one or more fiat currencies. Also, due to the rapid market and international developments, and taking an approach similar to some other jurisdictions, the HKMA considers them important for the regime to have appropriate flexibility to enable the authority to scope in other stablecoin structures and stablecoin-related financial activities into the regulatory regime as necessary in the future. We will conduct further consultation to seek market and public feedback as we develop more granular proposed regulatory parameters and arrangements.


This will also mean that trading in virtual assets will be restricted to highly liquid products for retail investors when a new licencing regime comes into effect in June, according to the Security and Future Commission - SFC.



For more information you can contact AOGB Professional Services Group.

Comments


bottom of page