HashKey Exchange CEO Ong Siu Ki: Compliance is the key to future development, and Hong Kong and Singapore will still be global cryptocurrency asset centers in the future

Reporter: Wu Tianyi

Intern Reporter: Riley

Produced by: DeThings

From September 18 to 19, the TOKEN2049 summit was held as scheduled in Singapore. As a globally renowned event in the cryptocurrency industry, Hong Kong and Singapore, which have previously hosted the summit, are once again placed on opposite ends of the scale. The advantages and disadvantages of the two locations in terms of policy friendliness, technology talent attraction, and financial infrastructure have become a focal point of ongoing industry attention. The question of which city, Hong Kong or Singapore, can stand out in this competition has sparked lively discussions.

On September 19, HashKey Exchange CEO Ong Siu Khee was interviewed exclusively by DeThings at the TOKEN2049 conference. As a licensed cryptocurrency exchange headquartered in Hong Kong, Ong mentioned during the interview that the regulatory differences between Hong Kong and Singapore give each location unique characteristics in the development of the Web3 industry. Hong Kong places more emphasis on the regulation of exchanges, while Singapore focuses more on trade, payments, and funds, creating a certain competitive relationship. For practitioners, Ong pointed out, "Hong Kong has more advantages than Singapore in terms of technology talent, especially in attracting talent from mainland China. In contrast, most of Singapore's Web3 talent is attracted from around the world."

Additionally, Ong stated, "As soon as interest rate cuts begin, market sentiment will gradually turn positive within the next year." He noted that with the adjustment of global financial markets, especially in the context of U.S. interest rate cuts, crypto assets will usher in a new growth cycle, particularly Bitcoin, which, due to its constant supply and long-term investment value, has become a key focus for major financial institutions worldwide.

Below is the transcript of the interview, with edits.

"Both Hong Kong and Singapore will still be global centers for crypto assets"

DeThings: How do Web3 practitioners in Singapore view the Web3 regulation in Singapore? What direction will global regulation develop in the future? Ong Siu Khee: Singapore was one of the first countries to support the crypto industry globally. As early as 2017, Singapore clarified that token issuance is legal locally. Due to clear and protective policies, many practitioners have been attracted to conduct business in Singapore. Singapore took similar actions around the same time as Japan, establishing its important position in the global Web3 field.

However, it is worth noting that Japan and Singapore have different regulatory stances and policies. Japan adopts a strict and clear regulatory framework, while Singapore is relatively more relaxed. This relaxed regulatory attitude in Singapore is closely related to its role as a global trade hub and its long-standing policy of encouraging foreign investment. Therefore, Singapore appears more open to allowing legal token issuance. At that time, many project teams planning to issue tokens would choose to register companies in Singapore or offshore and issue tokens according to Singaporean law.

The reason for establishing token foundations and governance structures in Singapore was initially due to this relaxed regulatory environment. As other regions had unclear regulatory frameworks or took an opposing stance on cryptocurrencies, many practitioners migrated to Singapore, allowing it to quickly emerge in the Web3 field and become an important global center for Web3.

However, influenced by the FTX incident, Singapore's regulatory attitude has become more conservative over the past two years. In fact, the global regulatory trend is also moving towards greater compliance. The most representative regions are Hong Kong, as well as Dubai and Abu Dhabi in the UAE. Next, Europe may also move towards compliance, as the global market gradually transitions from disorder to regulation. The policy direction in the United States is highly anticipated, especially if Trump returns to power, which could accelerate the formulation of relevant laws. Therefore, regulations around the world are gradually entering a compliance era.

For a long time, there has not been a clear timeline for the compliance process within the industry. However, an important turning point was the increased regulatory scrutiny by the U.S. on several major cryptocurrency exchanges, taking severe measures against exchanges that did not prioritize compliance, even pursuing criminal liability. This has made both the industry and the public realize that regulation has entered a new stage. In fact, since the Financial Action Task Force began advocating for global regulation of cryptocurrencies in 2018, the goal has been to prevent money laundering, terrorist organizations, and transnational crime from abusing cryptocurrencies.

Although this initiative began in 2018, many countries around the world did not truly pay attention to this issue until the U.S. strengthened its regulation of cryptocurrencies, prompting a shift in the global regulatory landscape. More and more countries have begun to take action, from France to Nigeria in Africa, and many other countries, both large and small, have started regulating cryptocurrencies.

Many countries are not only strengthening regulation at the legal level but are also beginning to pursue related illegal activities from a criminal liability perspective. The year 2023 is seen as the year of compliance for the entire industry, as the global cryptocurrency industry gradually moves towards compliance. In the past, the industry operated in a gray area, but now compliance has become an unavoidable requirement. Many industries have experienced gray areas in their development, and banking is no exception. For example, in Chinese history, the earliest banks or money shops developed from informal orders without formal regulations.

Taking the Shanxi bank as an example, at that time, businesspeople found it inconvenient to transfer money earned from all over the country back to Shanxi, so they established banks in various locations, forming a set of informal financial systems. These banks later developed into large chain enterprises, the most famous being Rishengchang, whose founder, Lei Lvtai, guaranteed the bank with personal credibility, similar to the personal guarantee model of today's cryptocurrency exchange founders. However, any business will face cyclical challenges, including the cycles of the business itself, economic cycles, and political cycles, and ultimately, the banks could not sustain themselves. Subsequently, the state recognized the industry's demand and began issuing licenses for regulated management, allowing the industry to develop healthily. This history is very similar to the development path of today's cryptocurrency industry.

Starting in 2023, global regulation is gradually tightening, and compliance has become the mainstream trend in industry development. Nowadays, even major exchanges are beginning to shrink their operations in non-compliant markets or close risky business markets. For example, many large exchanges have already closed their operations in Turkey, Nigeria, France, and other places while actively laying out in licensed markets.

DeThings: Can you explain what "non-compliance" means? For example, if a platform participates in trading within its platform and profits from it, does that count as non-compliance?

Ong Siu Khee: From a compliance perspective, for example, according to Hong Kong's regulatory requirements, the platform can only act as a trading intermediary and must not participate in trading activities. In the FTX incident, the platform misappropriated user assets, and the separation of platform assets and user assets was not effectively maintained, which constitutes non-compliance. After the incident, licensed exchanges, such as Hong Kong's regulatory bodies (like the Securities and Futures Commission), will conduct regular inspections to ensure the separation of platform assets and customer assets and ensure that the regulatory mechanisms effectively prevent the platform from accessing user funds. These key lessons are gradually being absorbed into the regulatory framework, forming stricter systems and rules.

The current global regulatory trend is that non-regulated markets are gradually shrinking, while the share of licensed markets is gradually expanding. If U.S. ETFs are also considered a form of licensed exchange, then it can be anticipated that in the next two to three years, the market share of global licensed exchanges may exceed 50%.

In the past, regulations in various countries mainly targeted illegal securities markets, and now the regulation of cryptocurrencies largely stems from the crackdown on illegal securities. When the U.S. was restructuring the industry, the core question raised was: "Is the asset you issued a security?" If it is a security and not registered, then it is illegal.

Looking ahead, both Hong Kong and Singapore will still be global centers for crypto assets and will continue to optimize and improve relevant laws and regulations. Although Singapore was somewhat impacted by the FTX incident, it still recognizes the importance of the crypto industry to the country. The development of Web3 has brought significant economic benefits, especially in consumption and trade, as evidenced by the surge in hotel prices and consumer spending in Singapore, which underscores the importance of this industry to Singapore.

DeThings: From your observation, do you think Singapore's regulation still views the crypto industry as an important sector? How do you compare the regulatory attitudes of Singapore and Hong Kong?

Ong Siu Khee: We actually have deep layouts in both Hong Kong and Singapore and hold relevant licenses. Singapore's policies were initially more aggressive and open, while Hong Kong, although positive, did not initially make a clear statement, and it wasn't until 2022 that Hong Kong began to explicitly release relevant policies. In 2022, Singapore's policies contracted due to the impact of the FTX incident, allowing Hong Kong to take more steps in regulation, giving the impression that Hong Kong is more proactive.

However, with the implementation of some policies in Hong Kong in 2023 and 2024, some global practitioners have begun to feel that Hong Kong's regulation is too strict. Hong Kong's advantage lies in being one of the global financial centers, with a mature financial regulatory system and strong competitiveness in attracting capital. But because of this, its regulatory process also appears overly cautious, lacking a certain degree of flexibility compared to Singapore.

However, recently, Hong Kong has also recognized the importance of the crypto industry and has begun to accelerate its opening pace. For example, Hong Kong previously only allowed retail investors to trade Bitcoin and Ethereum, but recently added two new cryptocurrencies and plans to open trading for more coins. Additionally, Hong Kong has launched a regulatory sandbox for Hong Kong dollar stablecoins and is promoting relevant regulations for central bank digital currencies (CBDC). These measures indicate that Hong Kong's position in the Web3 field is becoming increasingly important.

Hong Kong has also quickly launched its first Ethereum ETF, competing with the U.S. in this field. This also marks Hong Kong's increasingly important role in the Web3 and financial sectors. Compared to Singapore, Singapore will be more cautious after experiencing a setback, but it is also seeking a balance between openness and regulation. In the next five years, the global compliance trend will become more apparent, and a flexible regulatory environment will bring advantages to various regions. Both Hong Kong and Singapore possess flexibility, making their prospects worth looking forward to.

DeThings: Do Hong Kong and Singapore currently have different business focuses? Is there a competitive relationship between the two locations?

Ong Siu Khee: The competition between Hong Kong and Singapore in business is very evident, with many practitioners considering whether to stay in Singapore or move to Hong Kong. This competitive dynamic is particularly pronounced in the short term. I believe Hong Kong's current focus is on exchange regulation, as it already has a mature exchange business system, such as globally renowned platforms like Bitfinex. In contrast, Singapore does not have such a large-scale industry in securities trading and may focus more on trade, payments, funds, and OTC trading. Therefore, the two locations have different business focuses. The first phase of Hong Kong's regulation mainly targets exchanges, including existing on-exchange trading and OTC trading. Hong Kong's regulatory system is in the process of evolving, with the Securities and Futures Commission and customs jointly taking on some regulatory responsibilities, which is an important difference from Singapore.

DeThings: As a practitioner, how should I choose the right location? If Hong Kong is currently mainly focused on exchange regulation, could this lead to a problem where participants are limited to companies with specific backgrounds? For example, if I write an excellent DeFi program but do not have an exchange background, would I be unable to enter this market?
Ong Siu Khee: For practitioners, Hong Kong does not prohibit non-exchange Web3 applications; in fact, it encourages such innovations. However, due to stricter regulations on exchanges, if you are engaged in this area, you will face more restrictions. For example, DeFi is an encouraged innovative application in Hong Kong. You need to consider more about management radius, management costs, and where your target market is. In terms of development convenience, is it more suitable in Hong Kong or Singapore? It also depends on how much you value technology talent.

Hong Kong and Singapore have different foundations in terms of technology talent. Hong Kong has more advantages than Singapore, especially in attracting talent from mainland China. For example, the geographical advantage of Shenzhen and Hong Kong allows for a collaborative development model where the R&D base is in Shenzhen, and the storefront is in Hong Kong. This collaborative model gives Hong Kong a better foundation in terms of talent in the Greater Bay Area. In contrast, most of Singapore's Web3 talent is attracted from around the world, making its foundation relatively weak. Therefore, if you value R&D, Hong Kong may be a better choice.

"Is Web3 compromising with traditional finance, or is traditional finance forced to embrace Web3?"

DeThings: Under the current and future regulatory status, how can we ensure the overall liquidity of the market?

Ong Siu Khee: This relates to the issue of U.S. interest rate cuts that we discussed today. Over the past two years, the main trend in global monetary policy has been U.S. interest rate hikes. The effect of rate hikes is to attract global funds to the U.S., resulting in poor performance of financial assets, including Crypto ETFs, and suppressing market liquidity. The only exception is gold, but the rise in gold has many other factors, such as war and geopolitical issues.

However, as more sovereign countries begin to sell U.S. Treasury bonds and reduce trust in the dollar, once interest rates are cut, especially if they fall below 2%, the stock markets and other financial assets in emerging markets worldwide may experience a new bull market, and the Crypto market will not be an exception. The long-term value of Bitcoin will become increasingly evident because the total supply of Bitcoin is fixed at 21 million and is continuously decreasing due to lost private keys and other reasons.

This year, various funds in the U.S. are increasing their positions in Bitcoin, making substantial purchases in the range of $10,000, $20,000, $30,000, and $40,000. Therefore, when the dollar begins to cut interest rates and inflation rises, their average purchase price will be lower than that of other latecomers, giving them a competitive advantage.

DeThings: If the Federal Reserve cuts rates by 25 or 50 basis points, what impact would that have on Bitcoin prices?

Ong Siu Khee: In the short term, the market's reaction to rate cuts will vary. If rates are cut by 50 or even 75 basis points, the market's reaction will be more positive. If it's 25 basis points, the market may take a neutral stance. But as soon as rate cuts begin, market sentiment will gradually turn positive over the next year, driving liquidity for ETFs.

DeThings: Returning to the historical question, as Bitcoin is strongly correlated with U.S. interest rate cuts, does this mean Bitcoin has lost its original decentralized and anarchistic characteristics?

Ong Siu Khee: Not at all. In fact, this is a classic question. Last year, during the discussions about the approval of Bitcoin ETFs in the U.S., there was a heated debate within the industry: Is Web3 compromising with traditional finance, or is traditional finance forced to embrace Web3? Currently, it seems more like the latter, that traditional financial institutions have to accept Web3. Traditional financial institutions are exchanging their dollars for Bitcoin precisely because they expect Bitcoin's long-term value to exceed that of the dollar. This is not Web3 bowing to traditional finance; rather, it is a victory for Web3, marking an irreversible trend where Bitcoin is replacing part of the dollar's value.
Infrastructure is gradually improving, and the potential of Web3 will be gradually released.

DeThings: Besides interest rate cuts, what other aspects are being focused on in the industry?

Ong Siu Khee: Interest rate cuts reflect the financial attributes of Web3, showing its linkage with traditional finance. Therefore, financial attributes are a key focus. Additionally, the industry is looking forward to seeing the implementation of Web3 application scenarios. For a long time, many people believed that Web3 products were just illusory tokens used for speculation, but now more and more effective scenarios are beginning to emerge.

For example, GameFi and cross-border payments have already seen practical applications, and DeFi is also integrating with traditional finance. We are now waiting to see who will take the first step in the transformation.

DeThings: NFTs were once all the rage, but the market later cooled down. How do you view this phenomenon?

Ong Siu Khee: The boom of NFTs was, to some extent, a misunderstanding of the traditional collectibles world entering the crypto space. Many traditional collectors entered the crypto circle to speculate, leading to a bubble in the market in the short term. However, what truly has long-term value are applications that originate from the Crypto world. In the future, as more applications with actual value are implemented, Web3 will enter a new stage of development.

DeThings: So, is the discussion within the industry more focused on how to effectively integrate blockchain with other industries?

Ong Siu Khee: Yes. What is worth looking forward to in the future is the widespread application of blockchain technology, allowing ordinary users to have blockchain-related applications on their phones. This will be a turning point in the industry's development, similar to the explosion of the internet. The internet experienced a bubble period from 2000 to 2003, where many people went public with just a PPT, but as the bubble burst, the true value of the internet industry gradually became apparent. I believe Web3 is currently in a similar early stage.

DeThings: If we compare it to Web2, what stage do you think Web3 is currently at?

Ong Siu Khee: The current development stage of Web3 is roughly equivalent to the internet around the year 2000, in its early stages. At that time, the infrastructure of the internet was not yet complete, and many countries were discussing whether to ban the internet, while today's Web3 faces similar challenges. Although there are not many applications implemented yet, the infrastructure is gradually improving, and in the future, as technology matures and regulations become clearer, the potential of Web3 will gradually be released.

After several upgrades, Ethereum's on-chain performance has approached processing tens of thousands of transactions per second, with hundreds of thousands of nodes participating globally, similar to the broadband proliferation in the early days of the internet. We are in a stage where technological infrastructure is gradually improving, and the prospect of application explosion is already evident.