The era of Web3 Compliance has arrived, what is the development outlook for exchanges?

Recently, a series of actions in Hong Kong's Web3 field has attracted significant attention from the industry. It is reported that the Hong Kong Securities and Futures Commission has received over 80 substantial operation reports, and it is expected that more than 130 virtual asset exchanges will ultimately apply for the relevant licenses. Although Hong Kong's compliance policies are currently relatively behind, as an international financial center, Hong Kong has huge potential to embrace Web3. Many exchanges choose to take the compliance route in Hong Kong, valuing not only the Web3 sector but also the overall landscape of the financial world. The compliance sector contains enormous potential, and if executed properly, it could even change the global landscape.

The cryptocurrency trading model needs to be enriched

Currently, there are mainly two modes of cryptocurrency trading: one is users trading with the order book on the exchange, which is fast but lacks bargaining power; the other is asking for quotes in social groups, which is flexible but carries fraud risks. Industry insiders believe that cryptocurrency trading lacks tools similar to "over-the-counter trading platforms" in traditional finance and needs to introduce more diversified trading modes to meet different needs.

Challenges Facing Web3 Finance

Under the compliance policies in Hong Kong, many traditional financial institutions are preparing to layout Web3 finance, but they face two major challenges: first, a lack of understanding of virtual assets, which requires time to learn; second, the outlook is still unclear, and the return on investment is in doubt. At the same time, several Web3 exchanges are applying for relevant licenses in Hong Kong, hoping to achieve synergy with traditional financial clients.

CeFi or a Bridge for Traditional Finance to Enter Web3

For traditional financial investors in Hong Kong, the entry barrier for DeFi operations is relatively high. In contrast, CeFi aligns more with their usage habits and is easier to get started. Considering the vast investor base in Hong Kong, educating so many users on how to use wallets, assess asset safety, and other DeFi knowledge will be a daunting task. Therefore, CeFi may become the preferred way for traditional financial investors to enter Web3.

However, the threshold for establishing a compliant CeFi exchange in Hong Kong is also quite high. Regulatory requirements mandate that exchanges must self-custody customer assets and cannot use third-party custodial services, which poses significant demands on the exchange's technology and compliance capabilities.

Contradictions Faced by Web3 Development

Web3 is currently facing a contradiction: projects that can make money in the short term often do not align with projects that have long-term value. What developers (Builder) are truly doing for the development of the industry may temporarily fail to gain market recognition. To resolve this contradiction, support from long-term capital is needed, rather than relying on short-term speculative funds.

Insiders believe that the overall atmosphere in the Web3 industry is currently quite pessimistic. Over the past few years, from mining to exchanges to VC investment, Web3 has given people the imagination of getting rich overnight. However, in the current environment, the industry faces the challenge of capital outflow and needs new narratives and quality projects to attract liquidity.

Conclusion

Despite the many challenges facing the development of Web3, Hong Kong's potential as an international financial center in this field cannot be ignored. In the future, Hong Kong is expected to achieve breakthroughs in areas such as digital currency, playing an important role in promoting industry development. This requires government support, market vitality, and the efforts of industry participants. It is believed that with the joint efforts of all parties, the Hong Kong Web3 industry will eventually welcome new development opportunities.