Hong Kong's leading scholar criticizes China and Hong Kong's cryptocurrency policies

Jul 17, 2024

Editor | Wu Blockchain

Source: https://mp.weixin.qq.com/s/f3ldeJpP0ucxjD0ZVzeVkQ

This event is the first session of HashKey New Horizons, focusing on the development prospects of Hong Kong’s virtual asset market. Professor Yang Wang from the Hong Kong University of Science and Technology (HKUST), a renowned mathematician and the current Vice President (Institutional Advancement) and Chair Professor of Mathematics at HKUST, has made significant contributions to the fields of big data and bio-intelligence. He has a deep understanding of the blockchain industry and Hong Kong government policies.

Here is a summary of Professor Wang’s speech:

In 2012, I flew from the US to Hong Kong, then to Shanghai. A friend of over 30 years, who was actually my student, picked me up at the airport. He told me he was following Bitcoin and suggested we do something together. I thought Bitcoin and blockchain were scams and didn’t pay much attention.

In 2014, I came to Hong Kong again, and he picked me up again. He mentioned a very smart young man and suggested I learn more. I still thought these were scams. Later, they approached Xiao Feng, and I realized I had missed two great opportunities. This painful lesson has taught me to always be cautious when giving advice about future directions.

In recent years, I have become more familiar with the industry and often communicate with the government about policies, though they don’t always appreciate my views, as I feel their efforts are too minimal.

From another perspective, I think Hong Kong’s service sector is too slow. We seem content with the status quo, but Hong Kong should aim higher and have the determination, even a belief, to lead the regional development, including the future direction of blockchain technology. I have been discussing digital currency development recently. Regardless of the outcome of the US-China trade war, markets for purely digital assets like Bitcoin will continue to exist and possibly grow. But we should not be satisfied with the current stage. I believe the ultimate economic future must integrate with the real economy, which is a rigid demand.

From any perspective, this is a rigid demand for China. For example, why has Huawei become China’s largest beef supplier? Transsion, a very successful mobile phone company in Africa, is also China’s largest coffee supplier. This is because local currencies tend to devalue, and they use monetary data to buy beef, a hard currency.

I have talked to many Chinese trade departments, including visiting Yiwu. For example, half of the money for goods sold in Yiwu can only be recovered in local currencies, which are not valuable. The challenge is how to use these currencies. Argentina has what China needs, such as lithium mines and beef.

So here comes a problem: why future development is so important. I often bring this up at the government level, though not always accepted. But I believe integrating the real economy through digitalization is crucial for the next generation of development. Of course, integrating artificial intelligence is also something we do well.

These future developments need forward-thinking and consideration of how to seamlessly integrate decentralized technology with regulation on-chain, sharing regulation with the real economy. This is actually very good but challenging. As someone said, we send people to space because it’s hard. For Hong Kong, we should have a simpler way out, let the profitable regions expand. The next step needs separate discussion.

Since October 31, 2022, Hong Kong’s policy progress has been slow. I hope it speeds up. We face challenges including a talent shortage, especially in professional approval areas.

I also noticed procedural issues. When discussing the digital economy, I learned from a government official that a government committee had nearly 50 members. Studies show if a committee exceeds seven people, its efficiency drops by 15% for each additional person. With 50 people, the efficiency is almost zero. We need reforms to avoid formalism.

At HKUST, we have been striving in talent cultivation. We encourage students to collaborate with industries, propose projects, and form teams. HashKey supports our students, and we expect similar support from Futu Securities.

I am amazed by our young people’s creativity. Some students, though not academically outstanding, are very passionate about projects they love.

However, Hong Kong needs to strengthen its focus on innovation cultivation. Web3 development requires not just funds but a good ecosystem, policies, and talent attraction. Hong Kong’s talent programs mainly target high-end talents, overlooking mid-level talents. We suggest building a complete Web3 ecosystem by attracting large amounts of talent, not just relying on traditional large fund investments.

After a new round of cleanups, I think it’s hard to completely clear unlicensed institutions. If I don’t serve Hong Kong citizens, there’s no reason to expel citizens, right? These people can bring some vitality to Hong Kong’s virtual asset ecosystem. But as for your earlier question, I don’t have a good answer. I have spoken with some leaders, and I believe that completely banning mining is a very unwise move because the end result is that the miners are driven to the United States or other places. The U.S. media has published articles saying that this is a $4 billion tax windfall because when these people move to the United States, they contribute to its tax revenue.

I suggested not driving them away. Instead of worrying about capital outflow, let state-owned enterprises mine or take shares in mining companies. For example, each mine could have at least 20% state-owned participation, solving problems while controlling risks. But that’s past.

I think there is still a very big problem right now: whenever cryptocurrency is mentioned, it immediately becomes an uncontrollable situation. However, China’s strategy might indeed need to go down this path. My personal view is that if Trump comes to power, China will need to re-evaluate all these policies in a very short time.

At this point, threats should not lead to a halt in China’s trade, which is simply not feasible. Therefore, China must adopt a bottom-line approach. Of course, China is currently developing its own stage system of socialism, but the volume is currently not significant. The next step, especially in the development of “Belt and Road” countries, will inevitably be the tokenization of real-world assets (RWA). Through RWA tokenization, if people can truly understand its importance, it will certainly be useful.

If this happens, I believe the market will open up. I think there will be a breakthrough in about three years, where people will reconsider what digital assets are and whether we should embrace them. This is my personal prediction. However, I also once predicted that Bitcoin was a scam, so take this with a grain of salt.

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Hong Kong's leading scholar criticizes China and Hong Kong's cryptocurrency policies

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