Dim Sum in a Crypto Hub

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The best way to see a city is to walk around it while eating. And if you can’t – maybe because of coronavirus restrictions – to read up on someone else who is eating.

This is the central idea of ​​the new book by Charles d’Haussy and Jame DiBiasio, “Block Kong: 21 Entrepreneurs and Financiers Leading Blockchain in Hong Kong”. Over the course of multiple breakfast, lunch or dinner dates, prominent crypto leaders tell the story of a city and industry in real time.

The authors make “kung fu tea” and dim sum with Ben Delo of BitMEX, a breakfast in the Happy Valley district of Hong Kong with Fangfang Chen of Algorand, and croissants and Soylent on Sam’s desk Bankman-Fried of FTX to set the record straight. (All profits from sales are donated to finance the training of local engineers.)

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A global financial center, Hong Kong has emerged as a major hub for the blockchain industry. It’s the base of ultra-visible exchanges like FTX (and, at least for a time, Binance), influential blockchain consortia like the Bitcoin Association, and some of the biggest investment groups in the industry, like Kenetic Capital.

“Hong Kong is an international financial center, so it becomes de facto an international center of digital assets,” Haussy said on Zoom, ahead of the working day for him. “While there is not yet a strong appetite for bitcoin, in and of itself, the laissez-faire economies and policies in Hong Kong provide a very rich ecosystem to thrive here.”

But the city-state is also often overlooked and undervalued – at least in Western media, says d’Haussy. According to recent statistics, Hong Kong has about one initial public offering (IPO) per day, 170 licensed banks, 600 stock brokers and 7 million residents.

The story continues

Technically part of China since 1997, the city-state operates according to its own financial and cultural rules. While President Xi Jinping has said it is blockchain and not bitcoin for China, in Hong Kong crypto is thriving – from Block.one to Galaxy Digital.

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“There is a real radical diversity here,” said d’Haussy. “It all started with Bitcoin, of course, but there have always been subgroups within the crypto ecosystem.” He noted that the first time Ethereum co-founder Vitalik Buterin discussed smart contracts was at a Bitcoin meeting in the city.

Over the course of 183 pages, you get the impression that Hong Kong is not just a participant in crypto, but at the forefront of some of the industry’s most revolutionary technological advancements.

Take CBDCs, or central bank digital currencies. The world is locked in a power struggle over which currency, if any, will become the next global reserve. Many pundits and pundits now think digital when they think of hegemony.

China has taken the lead in digitizing its renminbi, Europe is signaling a CBDC is imminent, while the US is still taking a wait-and-see approach. Bitcoin is in the mix, as are other smaller national or regional digital currency projects.

D’Haussy, when not eating or writing, oversees ConsenSys’ efforts to develop a multinational CBDC bridge between Hong Kong, Thailand, China and the United Arab Emirates, called m-CBDC. (ConsenSys is the Ethereum studio with a head office in a trendy corner of Brooklyn, NY)

“Usually you see CBDCs in silos for single national markets,” he said. The m-CBDC experience is a testament to the level of advancement and innovation underway in the East. Each central bank has its own monetary policies and regulations, its reserve requirements, and its level of comfort with financial confidentiality.

These are difficult issues to solve, but it’s not surprising to see this innovation happening in Asia, especially Hong Kong, he said.

“Asia in general adopts new technologies much faster because of the appetite for new things, as they are a little more willing to take risks,” he said. For example, digital and mobile payments have completely entered the market.

It is also at the forefront of the development of the digital yuan. One of the main themes of the book is how Facebook’s experiment on Libra (now Diem) made China take action. Financial regulators around the world immediately became concerned about the potential influence companies have on monetary policy – especially a mega-corporation with a track record of privacy and other abuses.

Similar concerns have been raised about the nascent CBDC in China, which may come with built-in use restrictions and increased financial oversight.

“You can’t get a shortcut around the data privacy and privacy laws of your respective countries just because you’re using a CBDC,” Haussy said, noting that privacy is at least partially coded by the culture. The Chinese will develop whatever they deem to comply with domestic market regulations.

Elsewhere, the market will decide whether it is comfortable with an international renminbi. “But I think the Chinese are very pragmatic and they will shape things so that it supports [international law],” he said.

To this monetary geopolitical conflict is added the rise of stable coins, or crypto-currencies designed to retain their value compared to fiat. Given how quickly crypto advances, it is likely that these coins will proliferate, especially in Asia.

With the choice of a US dollar from the Federal Reserve, Circle, exchange, or bank, many Hong Kong people choose the stablecoin version. It’s a trend that may not last long, however.

“Innovation goes faster in the private sector than in central banks, so the CBDCs are lagging behind. But in 2022, I think the volume of CBDC will exceed stable coins, ”said d’Haussy. CBDCs have an “intrinsic value proposition” of being fully compliant with tax and regulatory regulations and integrated with the global banking community. In addition, with stable coins, you have a counterparty risk.

But blockchain will certainly have its place, even if “the cryptocurrency use case is not a welcome thing in China,” he said. Specifically in the Belt and Road initiative, designed to help developing countries skip development phases and enter digital infrastructure directly and forge links with the communist state.

“The Chinese understand that blockchain is a collaborative technology and many different organizations are investing heavily in it,” he said.

With China’s growing presence on the world stage, some have wondered how long Hong Kong could maintain its (semi) independence. Since before the turn of the century, Hong Kong has maintained its autonomy and ties to international capitalism with little interference from mainland China under the “one country, two systems” policy.

In June 2020, China passed a sweeping security law that restricts the city’s residents’ right to protest. Tensions have erupted and the future of Hong Kong’s independence is now in question.

“There are changes in Hong Kong, like the way things change after an election in the United States, but people stay here. Everyone is here, because that’s where finance happens, ”said d’Haussy. “The changes that are happening don’t break the feeling, they don’t break the energy. We continue. “

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