Author: Meng Yan

When I went to Hong Kong in early August this year, it was the peak of the popularity of Hong Kong's stablecoins and RWA. In a previous article, I described the situation like this:

“With local stablecoin legislation in the US and Hong Kong, and the stock market and currency market conditions driven by it, everyone in Hong Kong is now hotly discussing stablecoins and RWA. Every dinner table is discussing recent market trends and market rumors. Traditional financial giants have begun to actively participate in crypto opportunities. A large number of traditional Internet and AI entrepreneurs have gone to Hong Kong to seek ways to integrate Web3. Many forward-looking entrepreneurs from traditional industries are also Beginning to pay attention to crypto, even discussing stablecoins and RWA in the hotel lobby will attract curious inquiries and exchanges. I don't think I've experienced this kind of event since 2018. Before I came to Hong Kong, I was guessing that the current center of global crypto is in New York, but it just so happened that a Wall Street banker I know had just moved from New York to Hong Kong. He told me that Hong Kong's crypto popularity far surpassed New York, so if I were to rank in terms of popularity, Hong Kong is definitely number one in the world now.

”

Less than two months have passed, and mixed signals have come from Hong Kong. On the one hand, the Hong Kong government recently continued to state in an important comprehensive report that it will promote the development of stablecoins and tokenized assets, which shows that Hong Kong's crypto industry policy has not substantially changed. On the other hand, some media reports and rumours have cross-confirmed that the mainland supervisory authorities have made a major shift in the policy of mainland Chinese financial institutions to participate in RWA business in Hong Kong, affecting Hong Kong and causing outsiders to doubt the future of Hong Kong's crypto industry. It is said that the popularity of crypto in Hong Kong has dropped so much that the text above now has a bit of a sense of vicissitudes, “Remembering the heyday of the Kaiyuan era, Xiaoyi still harbors thousands of families.” I'm very thankful that an analytical article I had planned was delayed because

of the US itinerary; otherwise, I would inevitably be a bit embarrassed to read it now.

This isn't the first time. The speculation about when Hong Kong's crypto policy “will come” is an enduring hot topic of discussion in the Chinese crypto community. However, repeated sighs and screams about the hesitation of regulatory policies are the same as Li Guyi's “Unforgettable Tonight” for

the CCTV Spring Festival Gala. It is the final song of every round of discussions.
There is

no need to doubt it. Contradictory signals indicate that the matter itself is not simple. Repeated policies indicate that the situation faced by decision makers is complicated. Therefore, at this moment, we must first judge what the supervision will do, and the other is to decide what to do ourselves

.

Regarding the first question, my judgment is this: the regulation will allow Hong Kong to fully participate in the US-led blockchain digital economy with limited local resources, but it will strictly restrict mainland individuals and enterprises from being deeply involved.

Put the facts and make sense. The current situation is like this: the application prospects of blockchain technology are clear, but its political and economic consequences are uncertain.

With the US showing, the application scenarios of blockchain have become clear. If anyone else asks you with disdain, “What is the use of blockchain other than trading coins”? Then throw this answer on his face: the largest and most efficient resource allocation network in history will be built on the blockchain. Within 20 years, people will be able to trade any asset with digital currency anytime, anywhere. Capital, future cash flow, control, data rights, AI computing power, robot command power, energy, and everything that can be digitized will flow around the world in seconds. All regulatory rules, capital controls, and market barriers that have not been converted into smart contracts will be as fictitious and faltering as the 19th century's lockdown and maritime ban policies. Simply put, blockchain is the digital economy WTO

.

Such an efficient resource allocation network can push market efficiency to the extreme. However, the so-called efficiency of the market means “everyone gets their place.” In an ideal world, this would be great news for most people, but in the real world, allocating whose resources to whom to do what is far from being a simple economic issue. In particular, this digital economic voyage did not occur during the historical phase of Thomas Friedman's “Great Reconciliation” writing “The World Is Flat,” but rather at a historical stage in which the American political review publication “The New Republic” thought it was on the eve of World War I. Therefore, it is bound to not be just a simple financial technology advance that is

inclusive, but will inevitably be measured over and over again by everyone on the balance of victory or loss.
The

results of winning and losing cannot be overemphasized. Unless this resource allocation network cannot be built, the rise and fall of an individual, a company, and a country over the next few decades will largely determine its position in the network. Just as a person's power and wealth mainly depends on his position in the social network, rather than on an individual's intelligence and physical strength, an economy's power and wealth in the digital economy will also depend mainly on its position in the blockchain economic network, rather than its own productivity. As a technology, blockchain wants to create a new digital economic order. Order is also a product, and it is the most important product of all products. Therefore, my opinion is different from most people. The position of an economy in the future digital economy order

is more important than its AI computing power.

However, speculating on one's place in the blockchain order is very difficult. The market never offers promises to anyone other than the rule-makers. Join this network and you may be a

winner or loser.

This uncertainty can be an additional source of confusion for an economy's policymakers.

I'm trying to programmatize this tangling into a set of “if-else” logical nesting: join and dominate if I can dominate the blockchain economy as a rule-maker.

Otherwise, join and participate if I get acceptable results.

Otherwise, if I don't join, I can be a winner, or at least if I don't become a loser, I won't join, shut down, and

be honorably isolated.

Otherwise, if I can start a different story as a rule-maker

, I won't join and start a different story.

Otherwise — that means you will lose if you don't join, and if you don't have a chance to start a new stove, then join

and work around for a long time.

Compared to

this logic, it's not hard for us to understand the Trump administration's aggressive blockchain policy. The US simply answered yes in the first judgement branch; its main strategy is not

only participation, but also domination and rule-making.

And most other economies around the world may still be calculating gains and losses, or they may still wait and see. Maybe this doesn't have to happen? Maybe the next US administration can turn the plate around? Maybe wait

and see for a few more years?

This idea is very dangerous because America is running at full speed.

Following the US passing of the stablecoin bill in July, the baton is now in the US Securities Regulatory Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The two departments are moving faster than previously most optimistic expectations. They plan to quickly push the stocks and bonds of all US listed companies onto the chain and introduce a new regulatory framework that drastically relaxes digital asset transactions before the end of the year. This means that by next year, hundreds of millions of “digital economy travelers” around the world will be able to use stablecoins to buy shares and claims of US companies and be protected by the US regulatory system. Once the US becomes the only “regular army” in this network, then it will go through every digital barrier and suck the world's digital honey like a dog or bear breaking into an apiary. Blockchain will continue to pump money, data, computing power, and power to the US government and enterprises day and night, and America, which has tasted its sweetness, will never

go back.

There isn't much time left for hesitation.

Of all the “other” economies, China is the most special. In terms of strength, China is the only economy that has an opportunity to compete with the US for dominance in the digital economy on the chain. Although the best time for this matter has been missed, that doesn't mean we can't take the lead. China has had a successful experience in this regard. The problem now is that people have a very limited understanding of this new economic network that is currently being built, and they are unable to come up with a set of effective strategies like when they joined the WTO back then

.

Hong Kong is playing the role of such an experimental field. It is necessary not only to participate in games, explore paths, and cultivate talents, but also to prevent the expansion of experiments and

introduce risk and uncertainty into the mainland too early.

This logic is quite consistent with the current attitude of the Hong Kong supervisory authorities. If my guess

is right, then this kind of regulatory thinking will remain stable for some time to come.

For overseas Chinese blockchain practitioners, this means there is room for participation, but there are limits to operation. There is no problem with participating in the US-led blockchain economy in Hong Kong. In particular, the pure chain DeFi business is bound to become a must-compete place. However, at the same time, capital and assets from the mainland must be repeatedly verified to ensure compliance. In particular, the RWA conversion of mainland assets, which was in full swing some time ago, is a high-risk operation and

requires extreme caution.
As

far as individuals are concerned, right now is a time window for the entire industry to change chips, rules, and players. We must not hesitate and miss the timing due to some unclear local regulatory policies. I think Hong Kong's policies are repetitive, but there is enough room left. In particular, starting with DeFi, taking full advantage of the US regulatory framework's lenient window for DeFi, it

's not impossible to do much.