Unleashing the Potential of Web3 and Virtual Assets: Keith Choy’s Keynote Speech at the 2023 Hong Kong Web3 Carnival

According to reports, at the 2023 Hong Kong Web3 Carnival, Keith Choy, interim head of the Intermediary Department of the Hong Kong Securities and Futures Commission, stated in his keynote speech that he would unleash the potential of Web3 and virtual assets. DeFi has concerns about financial stability, data, and investor protection, mainly due to concerns about leverage and borrowing. Starting from June this year, whether the virtual asset trading platform (VATP) provides securities tokens or non securities tokens, we will have to issue licenses to protect investors. According to our existing system for VATP, we still need to conduct relevant consultations, make some adjustments and supplements, and suggest setting additional admission rules for retail investors. We call on all relevant parties in the market to actively participate in discussions and engage in constructive dialogue with us.

Interim Director of the Intermediary Department of the Hong Kong Securities Regulatory Commission: Will unleash the potential of Web3 and virtual assets

The 2023 Hong Kong Web3 Carnival saw a significant keynote speech by Keith Choy, interim head of the Intermediary Department of the Hong Kong Securities and Futures Commission. His speech focused on unleashing the potential of Web3 and virtual assets, emphasizing the concerns around financial stability, data, and investor protection in Decentralized Finance (DeFi) due to concerns about leverage and borrowing.

Table of Contents

1. Introduction
2. Understanding Web3 and Virtual Assets
3. Concerns in Decentralized Finance
4. Virtual Asset Trading Platform (VATP) and Investor Protection
5. The Need for Consultations, Adjustments, and Supplements
6. Admission Rules for Retail Investors
7. Active Participation in Discussions and Constructive Dialogue
8. Conclusion
9. FAQs

Introduction

In recent years, there has been a surge in the use and importance of virtual assets, such as cryptocurrencies, in the financial sector. With the advent of Web3 and the advantages it brings to the table, there is a growing potential to create a more robust and efficient financial system. However, there are fundamental concerns around financial stability, data, and investor protection in Decentralized Finance (DeFi).

Understanding Web3 and Virtual assets

Web3 can be defined as a decentralized network that enables the creation, management, and execution of smart contracts. Smart contracts come with several benefits, such as transparency, efficiency, and cost-effectiveness, which can be leveraged for a range of financial applications. Virtual assets, such as cryptocurrencies, are a potential use case of Web3.

Concerns in Decentralized Finance

Decentralized Finance or DeFi is an emerging financial system that operates on the Blockchain. Despite the potential benefits, such as increased transparency and lower costs, there are concerns around financial stability, data, and investor protection. One of the primary concerns with DeFi is the use of leverage and borrowing, which can lead to systemic risks.

Virtual Asset Trading Platform (VATP) and Investor Protection

To mitigate these concerns, the Hong Kong Securities and Futures Commission is taking steps to regulate virtual assets. Starting from June this year, whether the virtual asset trading platform (VATP) provides securities tokens or non-securities tokens, they will have to obtain licenses to protect investors. The virtual assets trading platform will need to obtain a license to operate in Hong Kong, and the licenses will be issued only to those virtual assets trading platforms that meet the regulatory standards.

The Need for Consultations, Adjustments, and Supplements

Despite the regulatory measures, there is a need for consultations, adjustments, and supplements to the existing system for VATP. The regulations need to be comprehensive and effective, covering all the aspects regarding virtual assets, such as custody, trading, and issuance. The regulatory framework also needs to consider the unique features of virtual assets, such as the lack of physical assets, the inherent anonymity and the potential for misuse.

Admission Rules for Retail Investors

To ensure that investors are adequately protected, there is a need for additional admission rules for retail investors. Retail investors should be given access to virtual assets through regulated channels, such as licensed virtual assets trading platforms. The rules should set out minimum standards for the virtual assets trading platform and the virtual assets themselves so that only those virtual assets that meet the minimum standards can be traded on the platform.

Active Participation in Discussions and Constructive Dialogue

To ensure that the regulatory measures are effective and workable in practice, there is a need for active participation in discussions and constructive dialogue. It is important that all relevant parties in the market engage in discussions with regulators to ensure that the regulatory framework is comprehensive, effective and meets the needs of the market. Market participants should be proactive in identifying the potential risks and challenges and work with regulators to find ways to mitigate them.

Conclusion

In conclusion, Keith Choy’s keynote speech highlighted the need for regulatory measures to ensure financial stability, data privacy, and investor protection in the growing field of Decentralized Finance. With the increasing importance of virtual assets in the financial system, it is crucial to have effective and comprehensive regulations in place. The regulatory framework should consider the unique features of virtual assets, and all relevant parties in the market should engage in constructive dialogue with regulators to ensure that the regulatory framework meets the needs of the market.

FAQs

Q1. What are virtual assets?
A1. Virtual assets are digital assets that can be traded or stored on a decentralized network like the Blockchain.
Q2. What is Decentralized Finance (DeFi)?
A2. Decentralized finance is an emerging financial system that operates on the Blockchain, providing increased transparency and lower costs.
Q3. Why is investor protection crucial in virtual assets trading?
A3. Investor protection is crucial in virtual assets trading to ensure that investors are protected from fraud, misuse, and systemic risks.