I believe Hong Kong has the potential to become a global Web3 hub. With its rich financial resources, particularly the strong interest of the younger generation of family offices in digital assets, Hong Kong's unique financial background provides an advantage in supporting blockchain projects. The rapid development of Hong Kong in this field is remarkable, and maintaining its growth advantage will be key.

Article Author: Sunova

Source: MetaEra

Recently, MetaEra's Hong Kong section has been launched with great fanfare, featuring a series of events celebrating the "Second Anniversary of Hong Kong's New Crypto Policy." One of the key events is the "High-End Dialogue: Influential Leaders in Hong Kong Web3.0," and this issue features an interview with Yat Siu, co-founder and executive chairman of Animoca Brands. The content of this article is translated and edited based on the English interview.

Profile

Yat Siu, co-founder and executive chairman of Animoca Brands, is a leading figure in the blockchain and gaming industry. He serves as a member of the Hong Kong government's Web3.0 Development Advisory Committee and actively participates in promoting the application of digital property rights and decentralized technologies. Yat has extensive technical and entrepreneurial experience, having co-founded several successful startups before founding Animoca Brands. He is regarded as a thought leader in integrating non-fungible tokens (NFTs) into mainstream gaming and advocates for the transformative potential of blockchain technology in creating a fairer digital economy.

Key Insights

● Blockchain provides true ownership of digital assets, and Hong Kong can play a significant role in this area with its market economy framework.

● The success of shared networks will benefit the entire Web3 ecosystem, and Hong Kong can drive ecological prosperity through reinvestment in innovation.

● NFTs are not just a market but also symbols of identity and culture, serving as future tools for protecting creators' rights.

● Stablecoins act as a bridge between Web2 and Web3, converting traditional assets into Web3 assets and promoting mass adoption.

● Hong Kong has immense potential to nurture a new generation of innovative projects in the Web3 space.

● The Web3 investment ecosystem in Hong Kong is rapidly growing, although it is not as large as that in the U.S. and the Middle East, it has significant development potential.

● Animoca Brands operates in accordance with local regulations but has a much lower compliance burden than exchanges since it does not handle customer assets.

● Hong Kong is poised to become a global Web3 hub, but further proactive actions are needed to maintain competitiveness.

● Hong Kong has great potential for rapid development in the Web3 space by attracting talent.

● The open metaverse is steadily developing, with the Telegram and TON ecosystem and high-quality Web3 games becoming important game changers.

● Web3 enhances users' financial literacy, deepening their understanding of the value of capital, assets, and digital property rights.

Full Interview

MetaEra: Animoca Brands is at the forefront of protecting digital property rights. Could you elaborate on the implementation process of this technology and the tangible benefits it brings to content creators and rights holders? As a company rooted in Hong Kong, what improvements or advancements do you think Hong Kong can make to further enhance support for digital property rights?

Yat Siu: We utilize blockchain to create digital property rights because blockchain technology (like that used by Bitcoin) enables true digital ownership. For example, with Bitcoin, if it’s in your wallet, you truly own it; it cannot be taken away. Blockchain technology achieves this by recording ownership on a secure ledger. This technology can extend from value-storing assets (like Bitcoin) to NFTs (non-fungible tokens), which are unique digital identifiers used to signify digital assets like artwork or in-game items. NFTs represent the true provenance of digital items, similar to physical items in the real world.

In the digital world, proving ownership outside of a specific ecosystem is nearly impossible. For instance, if you want to sell an in-game item to someone outside the ecosystem, there is no reliable way to record or transfer ownership. In real life, you can verify a transaction to sell a car through legal documents, but digital items lack such guarantees. Blockchain changes this by making verifiable digital ownership possible, allowing these assets to be converted into capital.

Once an item is viewed as a capital asset, it can appreciate in value, and you have certainty of ownership, making it a viable investment option. Certainty of ownership is crucial—if you don’t have ownership, there’s no incentive to invest. For example, in Web2, platforms like Instagram allow you to build a reputation, but you don’t truly own it; the value belongs to the platform. This is similar to landlords and restaurant owners—after running a restaurant for years, it’s the location, not the business itself, that holds most of the value. However, Web3 enables you to own your digital assets.

Digital property rights open doors to new business opportunities, allowing people to build services on the assets they own, just as ownership in the real world allows for new service layers like car rentals or customization. Another aspect of ownership is its cultural value, reflecting identity. Many items we purchase reflect who we are, such as fashion or cars. Owning a specific brand or item (like a Tesla or Lamborghini) conveys certain traits without needing explanation. In the digital realm, gaming items and skins carry similar meanings, but currently, we don’t truly own them; we rent them. We see that a trillion-dollar market built on digital ownership has enormous potential.

As for Hong Kong, it is ideally positioned in this digital ownership revolution due to its market economy framework. Capital relies on property rights, and Hong Kong is one of the most capital-friendly cities in the world, understanding the value of property rights and capital. Hong Kong is also a financial center, similar to New York, Dubai, or Singapore, which are leading in Web3 and blockchain development. Hong Kong's financial expertise and support for industry innovation make it a natural leader in this field.

In light of recent challenges, such as competition from Singapore, Hong Kong has the opportunity to define its role as a future financial center by embracing Web3 and blockchain.

MetaEra: It’s refreshing to hear about Animoca Brands' leadership in protecting digital rights! This technology and innovation truly have game-changing power. Since we’re discussing technological applications, let’s move into the Web3 economy. What do you think is the most challenging part of building a robust Web3 economic model?**

Yat Siu: Animoca Brands contributes to the ecosystem by building, investing, and collaborating in the Web3 space. Although we are not a traditional fund, we are one of the largest investors in Web3, with over 540 investment cases. This makes us one of the largest investors in the overall Web3 landscape. Through our investments, we support and nurture entrepreneurs and builders, enhancing the resilience of the Web3 ecosystem.

The spirit of Web3 and blockchain centers on decentralization, which we interpret as broadly distributed shared ownership. A well-distributed and decentralized ecosystem promotes fairer competition and a more just market, balancing the competitive environment. In contrast, monopolies often dominate the market by leveraging their control. Decentralization counters this by redistributing power, creating a fairer and freer market.

We support this vision of a "shared network," meaning that by helping Web3 projects grow, the entire ecosystem will benefit. For example, if Bitcoin reaches $100,000, the entire Web3 space will benefit, not just Bitcoin holders, leading to increased network value, transactions, and liquidity. Unlike Web2, where companies like Facebook or Google primarily benefit themselves from their success, Web3's success is shared more broadly, with value permeating throughout the ecosystem.

Investing in Web3 is crucial for this growth. Imagine if every company in Hong Kong invested 5%-10% of their profits into local startups; the startup ecosystem would thrive, similar to the model in Silicon Valley. In Silicon Valley, despite sometimes lacking infrastructure compared to Hong Kong, innovation still flourishes due to the high concentration of angel investors. Here, it’s not just large funds; individual engineers and employees often invest in multiple projects. This culture of anyone being able to become an investor is a driving force behind innovation.

In contrast, this investment culture is less common in Hong Kong and much of the world. People may prefer to invest in real estate or stocks rather than startups. However, in Web3, most companies and individuals that profit tend to reinvest in other projects, creating a boosting effect that helps the ecosystem grow.

Regarding building in Web3, there’s no silver bullet, but a core concept is that tokens provide access to network effects. Tokens are network assets, like Bitcoin, that have financial and application utility, creating a dynamic that is distinctly different from traditional assets. For example, holding Facebook stock does not affect your use of Instagram, and the number of followers on Instagram does not impact your equity in Facebook—they are completely independent. But in Web3, they are unified: holding a token makes you a stakeholder in the network.

Owning a token means you have a stake in the network, not just as a store of value. This network asset is a unique type of asset, akin to owning a share of the network effect itself. The value of network economies (like token economies) grows through its users and utility, just like traditional economies. Building in Web3 is essentially about creating a network economy, and understanding how to optimize this is fundamentally different from establishing a typical business model. Many newcomers to Web3 may not realize they are creating a network economy; it’s more like forming a nation rather than just running a business.

MetaEra: Establishing an excellent user experience and community is a crucial part! Additionally, NFTs play a central role in this process. Could you tell us about the role of NFTs in the Animoca Brands ecosystem? What are your thoughts on new uses for NFTs in the future?**

Yat Siu: NFTs, as a technology, can be seen as a foundational shift, much like how MP3 changed music. NFTs represent "non-fungible tokens," and this description may not be the most appealing way to explain digital ownership. In the future, I don’t believe we will still call them NFTs; we might just say "digital ownership." That’s why we use the term "digital property rights." We believe this concept will ultimately become significant. However, for now, we need to explain this technology, which is why terms like NFT are still widely used, even if many people do not fully understand them.

Generally, we view NFTs as a storage of digital culture. They represent value that goes beyond money; they are not currency or stores of value but rather cultural storage. Within this cultural storage, there are different types of capital. Financial capital is obvious, but there are other forms, such as symbolic capital (like university degrees), cultural capital (art and literacy), and social capital (networks and friendships). For us, NFTs capture cultural, social, and symbolic capital. While meme coins may also represent part of these elements, NFTs carry more weight in terms of symbolism and culture. NFTs can be likened to Birkin bags, Picasso artworks, Lamborghinis, Rolexes, or even Nike shoes, all of which symbolize social identity and personal taste.

Because NFTs are unique, they have various applications in digital ownership, such as art or gaming items. They can also be used for intellectual property (IP), protecting music, dance, or educational rights in the form of NFTs. This allows creators to embed legal protections at a cost of less than a dollar, which is revolutionary. I envision future NFTs serving as tools for protecting, enhancing, and developing intellectual property. I’m not imagining a few rare NFTs, but billions of NFTs representing assets from property deeds to creative works that can then be traded, bought, and shared.

Currently, NFTs represent a $10 billion industry. Although it has declined from its peak in 2021, this is still a significant growth compared to nearly zero five or six years ago. NFTs have indeed changed the game in terms of digital rights and transactions, particularly with brand items like NFT Nike shoes, which confer unique symbolic value.

MetaEra: Animoca Brands has recently secured significant funding. What is the company's future capital operation strategy? Which businesses or regions will be prioritized for expansion next?**

Yat Siu: Animoca Brands has indeed been very active in fundraising, especially in regions like Saudi Arabia and the Middle East, which, along with the Asia-Pacific region, are growth markets. These regions have an open and friendly attitude towards Web3, making them ideal for our expansion. In addition to gaming and Web3, we are also focusing on two main areas: digital identity and education.

We are building reputation in Web3. Reputation is crucial for establishing trust, as it enables people to conduct business safely without revealing personal information. After all, blockchain does not show who the other party is; we can only see wallet addresses. However, to build a stronger network, understanding each other's reputation is essential. Imagine doing business repeatedly with strangers in Hong Kong without establishing any rapport. This is unsustainable. Through Mocaverse, we are creating a digital identity system that allows for reputation scoring, so even if you are meeting someone for the first time, you can trust new business contacts. This will increase trust, which is a vital factor in our industry.

The second focus area is education, particularly addressing the student loan crisis. In the U.S., this issue has reached $2.2 trillion. We aim to leverage Web3 to provide better student financing solutions, which could help reduce costs and increase returns. These initiatives in digital identity and education will support broader growth in gaming, decentralized finance (DeFi), and the entire Web3 ecosystem.

MetaEra: Animoca Brands is currently actively involved in Hong Kong's stablecoin initiative. How do you view the role of stablecoins in the blockchain ecosystem? What plans or perspectives does Animoca Brands have regarding the integration of stablecoins into its broader digital economy strategy?

Yat Siu: Our focus on stablecoins stems from the current lack of a stablecoin framework in Hong Kong. We are working with Standard Chartered Bank and HKT to create a locally-based stablecoin to support the local ecosystem and enhance confidence. We believe stablecoins serve as a bridge between Web2 and Web3, making it easier for users to convert assets into Web3 assets, as demonstrated by stablecoins like Tether and Circle. This initiative aligns with Animoca Brands' direction towards becoming an institutional-level Web3 participant, a role that still lacks further development in the industry.

The importance of stablecoins lies in their ability to guide users from Web2 to Web3 on a large scale. Stablecoins allow users to retain assets in familiar currency forms within Web3 and provide a simple way to transfer value. If someone creates value in Web3, converting it to stablecoins is faster and safer than going through an exchange, providing flexibility for further transactions or storage.

Our strategy regarding stablecoins also aligns with the idea of mass adoption, simplifying asset management through blockchain technology to make it more convenient.

MetaEra: Recently, there have been reports that Animoca Brands is considering an IPO in Hong Kong. Given the overall weakness of the Hong Kong capital market, how do you view the impact of new policies on the company's listing decision? What specific advantages do these policies bring to the company in market expansion?**

Yat Siu: Regarding a potential IPO, being a Hong Kong-based company has clear advantages. Despite the weakness in capital markets, Hong Kong remains one of the largest markets globally. Given that our headquarters are here, choosing Hong Kong is a reasonable decision. Although an IPO takes time, when we are ready, Hong Kong is likely to be an important market for us. Hong Kong is developing more comprehensive crypto policies and clearer regulations, which provide a good opportunity for our future listing.

MetaEra: Animoca Brands has invested in over 500 projects. What specific areas will you focus on next? Do you think Hong Kong has the potential to nurture a wave of new innovative projects? What are your thoughts on the current sentiment in the Web3 venture capital space, especially regarding hesitance to invest in projects led by Chinese founders?

Yat Siu: We are seeing rapid growth in Web3 development, with many Chinese founders leading the way. The Web3 model emphasizes property rights and asset frameworks, which aligns closely with Chinese business thinking, especially among people in Hong Kong and Greater China.

While many founders choose to operate outside mainland China, they have a deep understanding of this model and establish companies in places like Hong Kong and Singapore. Additionally, many well-known overseas Web3 companies are operated by Chinese or Chinese-descended individuals. This contrasts sharply with Web2, where there were relatively few Chinese founders with significant international influence. However, in Web3, the global impact of Chinese founders is quite pronounced. The largest exchanges globally, such as Binance, OKX, HTX, and Bitget, are primarily founded by Chinese individuals, with Coinbase being the exception. This reflects an important trend: Web3 is attracting a large number of Chinese entrepreneurs, which is very noteworthy. The capitalist principles of Web3 seem to resonate well with many people's intuitive understanding of it.

The scale and distribution of the investment community in Hong Kong's Web3 space far exceed that of Web2, meaning that Web3 startups here receive significantly more funding. This funding advantage allows Web3 companies to grow faster and larger in Hong Kong compared to Web2 companies. Moreover, many successful Web3 entrepreneurs reinvest their profits into new projects, creating a natural reinvestment cycle within the community.

Although Hong Kong's Web3 investment environment has not yet reached the scale of the U.S. or the Middle East, it possesses considerable potential. Hong Kong has substantial wealth, and the younger generation of family offices shows strong interest in digital assets, Web3, and blockchain. As a global financial center, Hong Kong has a profound understanding of financial systems, which aligns well with the principles of Web3 and blockchain.

While Hong Kong has traditionally focused more on public markets than private equity, blockchain and tokenization provide a rapidly developing alternative to public markets. This familiarity with liquid markets gives Hong Kong a unique advantage in supporting blockchain projects.

MetaEra: Animoca Brands' extensive investment strategy is truly impressive! As global interest in blockchain continues to grow, we also see increasing regulatory attention. How does Animoca Brands handle compliance issues in different regions? How does Hong Kong's approach differ from other markets? Additionally, how do you collaborate with other companies or government agencies to promote the development of Web3 and the metaverse?

Yat Siu: Regarding regulation, global frameworks are still evolving. Although a clear model has not yet formed, Hong Kong is progressing alongside places like Dubai, Singapore, Tokyo, and Liechtenstein. Most regulatory work focuses on alternative tokens, emphasizing liquid assets, while NFTs are generally viewed as consumer assets rather than financial instruments and are therefore largely unregulated.

In certain markets, we need to assess whether we will operate locally, which certainly requires compliance with local regulations. We have dedicated compliance and legal teams to manage this. However, generally speaking, areas like Web3, gaming, NFTs, education, and digital identity do not face stringent regulatory requirements. Regulators have made it clear that these industries fall outside the current regulatory framework, meaning our regulatory burden is much lighter than that of exchanges.

Unlike exchanges, we do not handle customer assets or manage asset segregation. Our investments are made using our own balance sheet, and any asset management is supported by our funds. This is quite different from exchanges, which must comply with strict regulations regarding third-party asset custody and management. Therefore, while we comply with local laws in our business areas, our regulatory obligations are not as extensive as those of exchanges.

MetaEra: Animoca Brands' commitment to compliance indeed reflects its focus on sustainable and long-term growth! How do you view Hong Kong's evolving role in the global cryptocurrency space? While Hong Kong's shine may have diminished in the Web2.0 era, do you think it has the potential to reclaim its status as the "Pearl of the Orient" with the rise of Web3.0? Could Hong Kong's new crypto policies become a benchmark for global regulation?

Yat Siu: Hong Kong's goal is to become a global Web3 hub, although there is still much work to be done. To achieve this, Hong Kong needs to adopt a more proactive approach than other regions. The city has a rich talent pool in this area, making it easier for its people to understand the value of token economies—something that may be more challenging for outsiders. I believe Hong Kong has immense potential.

Web3 is still in its early stages, and it’s impressive to see the companies that have already launched or are being built here. Many companies have already grown significantly, which is particularly noteworthy considering that before Web3, Hong Kong was not a major tech hub. Now, Hong Kong truly has a real momentum. However, Hong Kong needs to maintain its growth advantage to stay competitive. Although it is not yet the largest platform—cities like Dubai and, to some extent, Singapore are still leading—Hong Kong is progressing rapidly. Attracting more talent will be key to its continued growth.

MetaEra: As an industry leader, how do you view the development of blockchain and metaverse technologies on the global stage? What emerging technologies do you think have the potential to change the game in the near future?

Yat Siu: The metaverse is still evolving, especially in the Web3 space. Many people are skeptical about the metaverse due to Facebook's failure to perform as expected, leading them to believe that the metaverse itself is failing. However, the "open metaverse" is actually thriving, with a market valuation of around $18 billion, primarily driven by gaming. I believe transformative areas will include platforms like Telegram and the TON ecosystem, which are facilitating rapid growth of Web3 products. Because they are not constrained by existing game distribution channels like Apple, Google, Facebook, and Steam regarding Web3 blockchain and NFTs, they provide users with a new integrated experience.

Another key area is gaming itself, particularly high-quality games that can connect Web2 and Web3. We are now seeing games enjoyed by Web2 players that they may not even realize are based on Web3. For example, Gunzilla's "Off the Grid," which is in our portfolio, may compete in popularity with PUBG and Fortnite. Players enjoy this game because it is fun, not necessarily because it is blockchain-based. This approach can seamlessly introduce Web2 users to Web3 through experiences they already love, like gaming.

Regarding global technological development, I believe the next phase will continue to focus on developing blockchains that can integrate user-friendly, immersive experiences. As a leader in this field, Animoca Brands is closely monitoring and innovating in emerging technologies that could redefine the metaverse and gaming.

MetaEra: As a Web 3.0 entrepreneur, what would you like to say to newcomers transitioning from Web 2.0 to Web 3.0?

Yat Siu: Overall, I want to convey that as you transition to Web3 and become a Web3 user, your financial literacy will improve. In other words, you will gain a deeper understanding of money, assets, and digital property rights, while becoming more adept at managing financial matters. I believe the true revolution of Web3 lies in guiding and enhancing financial literacy: the transition from Web2 to Web3 teaches you new skills, such as understanding the value of assets, property, and money, and how they work. This makes you a better investor and manager of your own portfolio—skills that are often not taught in schools, even though money is an essential tool in life. Web3 provides democratized access to financial knowledge and skills. In short, the transition from Web2 to Web3 enables you to enhance your financial literacy and capabilities.