Founder and CEO of the virtual asset infrastructure solutions firm Solarr, Alex Lee discusses the place of cryptocurrencies in Hong Kong’s economy and explains why a financial revolution is on its way.

With executive-level tenures at both OSL and HashKey – the only two government-licensed cryptocurrency exchanges in Hong Kong – Alex Lee has become a seasoned veteran within the Web 3.0 space, despite the technology’s relative youth. Indeed, as the great grandson of one of the founders of the Bank of East Asia, Lee’s entrepreneurial spirit has long guided him through the world of finance, and he set up the Web 3.0 company Solarr only last year. Tapping into his expertise, Lee walks us through how the advent of cryptocurrencies and blockchain technology have revolutionised the financial landscape, the latest developments in digital assets in Hong Kong, and where our city stands on the global stage regarding Web 3.0 adoption.

How have cryptocurrencies changed the world of finance?

There’s been a massive impact. You can see various monetary authorities embrace it, some as early as 2016. Governments in countries like Japan and Malta were the first to issue licenses for crypto exchanges, back in 2017. In Japan alone, they extended licenses to more than 10 exchanges in just that first year, so I think cryptocurrencies are definitely here to stay. And for the public to familiarise itself with crypto? To be honest, it’s already part of our daily lives. Crypto is a type of virtual asset, but we’ve been using many other virtual assets for years. We even have them on our phones, from our Octopus card and Asia Miles and Marco Polo points to Marriott Bonvoy points or even YUU. These are all virtual assets that we already own. They just don’t have the same infrastructure behind them to fully utilise their value, like blockchain does for cryptocurrencies.

What are some key things to keep in mind when entering the crypto markets?

There are tons of nuances, but the conventional wisdom to all investing is to do your homework thoroughly. Another important point is licensing, which is key. For example, in Hong Kong, the licensing regime is very mature, and it’s modelled after the Securities and Futures Ordinance. It’s the only lens the Securities and Futures Commission (SFC) would use to review licenses, and the standard is extremely high, especially since we’re one of the three largest financial markets in the world. So, look for licensed exchanges. Lastly, never take cybersecurity too lightly. Hacking and corporate theft do happen, so always make sure your login details are secure and that you have a backup of your details and digital wallet.

The SFC has just opened crypto trading to retail investors. What impact will this have on Hong Kong’s economy, its position as a leading financial hub and retail investors here?

They’ve opened the floodgates, and it’s a monumental moment for crypto development here. It’s important, because they’re finally executing the network effect that the blockchain technology was meant for. With retail investing, it also means you’re opening up for both merchants and payment gateways, so all those networks and systems can finally be upgraded from Web 2.0 to Web 3.0. In terms of the economy, a recent study by Visa indicates that one in three people in Hong Kong are familiar with, own, or have owned cryptocurrencies. This is a huge market to tap into. What we’re just missing now is financial inclusion: the banks need to play catch-up, so investors can settle payments with their digital assets or convert them back into fiat currencies.

Where does Hong Kong sit among other financial hubs in Asia in terms of crypto?

In the short term, it’ll look like Hong Kong is lagging behind, because we had a late start, especially when you compare us to Tokyo. Three years ago, there were already around 70,000 to 80,000 points of sales in Japan that accepted Bitcoin as payment, so we have a long way to go to catch up. As for Singapore, a closed-loop virtual asset system has been running for a few years now, and the banks have infrastructures built. Currently in Hong Kong, we only have two licensed exchanges that have been trading at a level much lower than Tokyo and Singapore, and both those cities also have payment gateways integrated with Web 2.0, a feature we have yet to build.

But if we look at the long run, we’ll eventually be more advanced than Tokyo and Singapore. It’ll take a bit of time but, after all, we can’t forget that Hong Kong is one of the three largest financial markets in the world alongside New York and London, and to hold that title is no easy feat. People often underestimate the amount of consideration the Monetary Authority or SFC puts into building these regulatory frameworks, but we have all the right infrastructure in place for the crypto market to thrive. We might have had a slow start, but it’ll pick up its pace significantly, and eventually we’ll overtake the other hubs in Asia.

What effect will Hong Kong’s approval of retail trading have on mainland China, where cryptocurrencies are banned? Will there be any spillover effects?

It’s a complex issue and, quite frankly, most of us don’t really have an answer to that. Historically, as a global financial hub, Hong Kong has held great importance for China, and I suspect we’ll continue to be an intermediary – like a centralised yet decentralised system. I also think that eventually the mainland won’t enforce an outright ban on cryptocurrencies, but its first digital currency will definitely be a virtual version of the RMB. The second? Maybe Bitcoin. At the end of the day, the regulators here can embrace cryptocurrencies because they got a green light from up north, so we’ll just have to see.

What impact will Hong Kong’s new Web 3.0 Task Force have on the future of crypto development in the city?

I think this task force is a must for Hong Kong to further its economic development, but it also depends on who it’s initiated by. Often, if it’s initiated by a group of policymakers and academics, it becomes a sort of think tank. Of course, sometimes we need think tanks, but we need practitioners to be part of them too. Web 3.0 is unique, because there are really two worlds within it: one is where the community thrives, and the other is where the creators and developers build out the technology. You need these two worlds to come together along with the policymakers to really make the task force effective, so in my view if you proceed with this task force but the community’s voice isn’t included, it’s not really Web 3.0. That said, this is a great start for the Hong Kong government.