Dialogue with HashKey Exchange RO and Exchange Director Heddy Tsang: The "Key Few" among Licensed Institutions
As one of only two licensed exchanges in five years, HashKey Exchange is undoubtedly a slice of the development of the virtual asset market in Hong Kong.HashKey Exchange RO (Responsible Officer) and Exchange Director Heddy Tsang's Keyword: Pulse
Since the Hong Kong Securities and Futures Commission (SFC) issued its position paper on regulating virtual asset trading platforms in November 2019, nearly five years have passed. In April this year, Bitcoin and Ethereum ETFs were launched in Hong Kong, and in the second half of the year, brokerages began to enter the market, heavily advertising virtual asset trading services, all connected to licensed exchanges. As one of the only two licensed exchanges in the past five years, HashKey Exchange is undoubtedly a slice of the development of Hong Kong's virtual asset market.
From obtaining a license to promoting its own platform business to embracing the traditional financial industry, HashKey Exchange, which just celebrated its first anniversary, has delivered an impressive report card. The cumulative trading volume exceeded HKD 500 billion, with over 250,000 customers and assets exceeding HKD 4.5 billion. Among them, the total trading volume of the omnibus brokerage business surpassed HKD 828 million, with zero downtime over the past 365 days and zero loss of customer assets, which is a strong testament to the capabilities of the HashKey team.
This also coincides with the first year since Heddy Tsang joined HashKey as the RO and Exchange Director. As a "key minority" among licensed institutions under Hong Kong's regulatory framework, the RO has always been a top priority for the SFC when reviewing license applications.
Having worked deeply in traditional financial institutions and virtual asset exchanges, Heddy Tsang has spent the past year at the intersection of resources with HashKey Exchange, experiencing the most genuine pulse of Hong Kong's virtual asset market while also observing the significant changes in the Web3 industry in Hong Kong.
This article is fortunate to feature an exclusive interview with HashKey Exchange RO and Exchange Director Heddy Tsang, and here we整理 the interview transcript for readers.
RO, the "Key Minority" in Hong Kong's Virtual Asset Market
Q: After doing some research, I see that you are not only one of the few RO holders of License 7 in Hong Kong but also have previously worked in traditional financial institutions and crypto exchanges. Could you share your previous career path and personal experiences in the Web3 industry?
A: In Hong Kong's regulatory framework, there are several different types of licenses. The most common are License 1 (securities trading), License 4 (advising on securities), and License 9 (asset management), but License 7 (providing automated trading services) has always been scarce. I have been fortunate to hold this license since 2008.
At that time, I was serving a European bank and planned to establish a financial derivatives business in Hong Kong. However, many products were not suitable for trading on the Hong Kong Stock Exchange, so we built our own platform and spent nearly two years applying for the corresponding license, which is how I became the holder of License 7.
Looking back at the time when the SFC announced the implementation of the licensing system in Hong Kong in 2019, the entire market suddenly realized that there might be no more than 200 qualified ROs holding License 7. At that time, each company applying for a license had to prepare at least four ROs. Therefore, after 2019, many early license holders, including myself, received renewed attention. Currently, the SFC has opened up its requirements for ROs to some extent. Even if applicants do not have a background in traditional finance, if they have rich operational experience in the crypto space, the SFC will consider them. As a result, the number of people applying for RO licenses has increased.
My first encounter with virtual assets was in 2017 when I was working in wealth management, responsible for evaluating products. Many people presented us with proposals related to cryptocurrencies, which we found very interesting and suitable for Hong Kong investors.
Interestingly, at that time, we considered it very bold for a client to allocate 10% of their assets to cryptocurrencies in traditional wealth allocation. However, by 2019, when I truly entered the crypto space, I was surprised to find that familiar people around me might allocate 90% of their assets to cryptocurrencies, leaving only 10% for daily expenses. They were even more willing to receive their salaries in cryptocurrencies, which really challenged my perceptions. I thought I was at the forefront of the times, but I realized how conservative and outdated I was in front of the new generation.
Q: Comparing your previous experience as an RO with your experience as an RO at HashKey Exchange, are there any differences?
A: Everything at HashKey is quite new to me, whether it's the people I interact with or the issues I face. However, I believe that the role of an RO is essentially the same in both traditional finance and the emerging virtual asset field. In practice, there is no position directly called "RO." If we translate RO into Chinese, it means "responsible personnel," which implies the need to take responsibility for certain matters. Simply put, the process of operating a platform can be likened to rolling dice, with each side representing different operational stages:
- Attracting New Customers: This is the first step, where we need to attract new customers and complete the KYC (Know Your Customer) process, which is the primary step in risk control. For example, a user can become our customer once they register and complete the entire KYC process.
- Customer Needs Analysis: After becoming a customer, we need to analyze their needs, as customer types vary (including individual customers, institutional customers, corporate customers, omnibus account customers, and fund customers), and each type may have different requirements. Therefore, we need to find ways to meet the diverse needs of different customers.
- Platform Operations and Maintenance: Our platform operates 24/7, so platform operations and maintenance include when to perform updates or upgrades and how to handle incidents when they occur.
- Product Management: We need to determine the types of products that can be bought and sold on the platform, as well as the introduction of new products and the phasing out of old products, while conducting market research and qualitative product analysis.
- Market Expansion: Within the existing framework, we need to find breakthrough methods. For example, since staking is currently not allowed in Hong Kong, how can we achieve a win-win solution that satisfies customers, the platform, and regulators?
- Marketing: When there are new products, we need to engage in marketing, publicity, and promotion, and then return to the first step of attracting new customers, forming a cycle.
As the responsible personnel, I need to have a clear understanding of these six parts; there cannot be any part that I am unaware of or not responsible for. Problems can arise at any time, and I never know which side of the dice will come up. Fortunately, we have not encountered major issues in the past year, and I trust the HashKey team. If something does happen, we can respond according to our plan.
Hong Kong's Virtual Asset Market Enters a "Great Navigation Era"
Q: We have seen traditional brokerages entering the virtual asset trading space recently. When did these brokerages start to show interest in cryptocurrencies? What do you think are the main concerns for fund companies, family offices, and listed companies that want to enter the market?
A: I believe that whether it's brokerages or banks, each institution has its own strategy and plan. If you are a leader in the market, you cannot ignore the overall trend of cryptocurrencies.
Therefore, many people are quietly working behind the scenes. For example, I have learned that many banks are actually ready with blockchain or tokenization services, but they have not yet launched them. Brokerages are also applying to the SFC for upgraded licenses while simultaneously engaging in technical integration with us. Once everything is in place, they can launch virtual asset trading services when the timing is right.
However, for "buy-side" entities in traditional finance, such as family offices and investment funds, if they really want to enter the market, their options are not limited to trading through compliant platforms in Hong Kong. Therefore, enhancing our competitiveness is the issue we need to consider for the future. To be honest, the solutions we currently offer do not meet their requirements. Our selection of spot products is limited, and futures contracts or derivative contracts as risk management tools are not permitted. This is why we have not yet seen a full-scale entry of traditional financial buy-side entities.
At the same time, we are also aware that licensed compliance is a global trend. The market expects that it will take at least two to three years for Hong Kong's virtual asset market to become relatively mature. To make the process smoother, HashKey and other leading players must actively build trust with regulators and drive more partners to promote industry development.
I also feel the SFC's active cooperation. Now we meet every two to three months, which definitely gives us time to discuss how we can promote industry development. We also explore the regulatory space, and every small breakthrough represents a significant increase in trust. I am grateful to represent HashKey at the forefront, experiencing the most genuine pulse of the market while also observing the growth of the Web3 industry. If we use 10% and 90% to represent the gap between traditional financial thinking and Web3 thinking, I believe this gap should narrow to 25%/75%.
Q: In the past year, what positive "externalities" has HashKey's business advancement brought to the entire Hong Kong market? How do you view the relationship between HashKey's business development and the macro environment of Hong Kong's virtual asset market?
A: That's a good question. In the past year, in addition to promoting business in Hong Kong, the group has also actively applied for virtual asset-related licenses in other jurisdictions. Importantly, HashKey's experience in Hong Kong has become a topic of great interest for many overseas regulatory agencies. In some jurisdictions that focus more on principles, our actual operational model provides concrete content for them to reference, especially in terms of safeguarding customer assets. It is worth noting that even in Japan, one of the first countries to legislate for crypto assets, incidents of customer losses due to hacking still occur. Therefore, exporting the Hong Kong version of HashKey's operational model will help further enhance Hong Kong's global leading position in the virtual asset and Web3 markets.
I am very confident in HashKey and the development of Hong Kong's virtual asset market. During my time in the financial derivatives industry, Hong Kong was the largest derivatives market in the world, and the bank I served was the largest derivatives issuer in Hong Kong and globally. I believe that HashKey and the Hong Kong crypto market becoming the top in the world is just around the corner.
Note: In this article, HashKey generally refers to HashKey Exchange.
