Article Author: 0x9999in1

Source: MetaEra

Recently, the MetaEra Hong Kong Zone has been launched with great fanfare, leading the "Two-Year Anniversary Celebration of Hong Kong's New Crypto Policy" series of events. An important part of this is the "High-End Dialogue: Influential Leaders in Hong Kong Web 3.0," and this issue features an interview with Professor Lin Chen, Associate Vice President of the University of Hong Kong.

Profile

Professor Lin Chen is currently the Associate Vice President of the University of Hong Kong, Vice Dean (Research and Knowledge Exchange) of the Faculty of Business and Economics, Chair Professor of Finance, and Professor of the Po Leung Kuk Foundation Chair in Finance. He is also the Director of the Research Center for Financial Innovation and Development, Director of the Doctor of Business Administration (DBA) program, and Associate Director of the HKU-Standard Chartered Charity Foundation FinTech Academy. He serves as a member of the Hong Kong SAR Government's Task Force on the Development of Web 3.0, an advisory member of the Hong Kong Monetary Authority's Financial Research Institute, and a financial technology advisory member of the Hong Kong Securities and Futures Commission.

Key Insights

● Web3 is not just limited to cryptocurrency speculation and chasing price fluctuations; it now has a broader vision and can truly become the third generation of the internet.

● Only by solving real problems can its business model achieve large-scale development.

● Web3 has evolved from a guerrilla model to a regular army operation. If significant development is desired, it must align with the entire regulatory framework.

● If RWA can rise, it can simultaneously drive both on-chain and off-chain development; there is no replacement, but rather a collaborative win-win situation.

● The current Web3 industry still appears to be in its early stages compared to its envisioned goals.

● Utilizing the advantages of the Hong Kong SAR to take the lead in trials, I believe there is great potential for Web3 development.

Full Interview

MetaEra: As a mentor and educator, from your perspective, how do you think talent cultivation and education in the Web 3.0 field should be conducted to meet the rapidly evolving demands of the industry? The University of Hong Kong has launched the "Web3 Global Elite Course" for society; what achievements have been made, and are there any new actions or plans?

Lin Chen: When I talked about blockchain and cryptocurrencies in 2017, industry professionals might have had some narrow views or biases. My feeling is that the transition from Crypto to Web3 represents a broader vision and ideal for the industry! It is no longer just limited to cryptocurrency speculation and chasing price fluctuations; it now has a larger vision and can truly become the third generation of the internet, with a fairer mechanism to better distribute the economic benefits generated by the system to holders, including users, developers, and contributors. Initially, we hoped this fair mechanism could self-supervise and self-regulate, forming a very good governance mechanism to realize this vision.

The term Web3 represents a significant upgrade compared to the previous simple concepts of digital currency and cryptocurrency. In the financial sector, we often mention financial literacy; the lack of financial knowledge can lead to many investment and financial management mistakes. Therefore, in the Web3 world, education in this area is still very necessary. Whether writing code or developing smart contracts, the general public's understanding of the Web3 ecosystem is very limited.

Even within the Web3 circle, people approach it from different angles. Some focus mainly on blockchain technology, while others pay attention to the fluctuations of digital currencies, so their perspectives are limited to their specific areas and may not provide a comprehensive macro understanding of Web3. The "Web3 Global Elite Course" we launched aims to provide a higher perspective to overlook the entire industry, including sector development, regulatory dynamics, technological breakthroughs, and industry empowerment, while paying less attention to the fluctuations of digital currencies. The price fluctuations of cryptocurrencies are closely related to major global events, such as the launch of new financial instruments or even the U.S. presidential elections. Therefore, we hope to clarify the underlying logic and stories. Based on this consideration, we have launched two sessions of the "Web3 Global Elite Course." Due to time constraints, the third session has not yet started.

Additionally, I want to say that Web3 education will be increasingly accepted by more people. The "Web3 Global Elite Course" aims to gather everyone interested in Web3, and the students involved are very professional, including some well-known figures in the field. Now we realize that education should not only target Web3 practitioners but also aim for broader public education. These are some of my thoughts on Web3 education.

MetaEra: Would you recommend your students to participate in Web 3.0 investment trading/startup projects?

Lin Chen: Many of them are already doing these things. The scale of Web3 is still relatively small compared to the global asset management industry and the entire financial ecosystem. Some large enterprises also engage in asset allocation, but they may not go all-in on Web3; they might allocate 5% or even 1% to Web3, which could have a significant impact on the Web3 ecosystem.

MetaEra: In your current work and research, do you still focus more on traditional finance, or are you investing more energy into Web 3.0 research? How do you balance the proportion of both in your current work priorities?

Lin Chen: I view this issue as follows: as a scholar, I track the direction of financial innovation. Our approach may not necessarily focus on which application in Web3 is the hottest or has 100x or 1000x growth potential, although these are things everyone is very interested in. However, from an academic perspective on Web3, we need to consider what real social problems the new approaches, business models, products, or technologies in Web3 can solve. Only by addressing real issues can its business model achieve large-scale development. Additionally, we also pay attention to financial stability. Events in Web3 that have impacted financial stability are essentially similar to issues easily observable in traditional finance. Our research on financial stability does not necessarily distinguish between the two but rather attempts to study why a new phenomenon arises, what real problems it solves, and whether it has systemic risks, and if so, how to correct them. Overall, we hope that new tools or products can generate real benefits and not make the entire financial ecosystem more fragile, but rather resilient.

Web3 has evolved to a point where it is no longer a guerrilla model but rather a regular army operation. If significant development is desired, it must align with the entire regulatory framework.

MetaEra: What core elements should traditional finance focus on first in welcoming the Web 3.0 wave, and what aspects should be prioritized?

Lin Chen: Stablecoins and RWA share a commonality in that they both involve the concept of physical assets being put on-chain. Most mainstream stablecoins are still based on the U.S. dollar as the underlying asset, and the concept of U.S. dollars on-chain is essentially consistent with the concept of physical assets on-chain.

Both of these allow on-chain participants to better access off-chain assets, meaning my funds do not need to go off-chain; I can hold them on-chain, including U.S. dollar assets, government bonds, real estate, precious metals, etc., all of which fall under the RWA concept. Once funds and assets are on-chain, it is easy to form a closed-loop ecosystem. The costs and difficulties of moving funds in and out between on-chain and off-chain are the highest. If on-chain funds can form a system, various types of off-chain assets can be allocated on-chain, addressing effectiveness and cost issues, which makes its rise reasonable.

In addition to stablecoins and RWA, there are actually many DeFi applications in Hong Kong that have already existed, including DEX, lending derivatives, and staking applications. From a certain perspective, many applications are very innovative, and there are many aspects of traditional finance that can be learned from them, including well-designed incentive mechanisms.

If regulation is more relaxed, Web3 will have different approaches and business models, and the ecosystem will be more prosperous. However, this will also create certain risks, so a balance must be found between regulation and risk.

MetaEra: The trend of RWA in Hong Kong is gaining momentum; how do you view the role and potential of RWA in promoting the digital transformation of traditional financial assets? What advantages does RWA have in Hong Kong's development?

Lin Chen: Since it involves putting physical assets on-chain, it clearly cannot rely solely on on-chain governance mechanisms or smart contracts, as the assets are off-chain. Therefore, for RWA to develop, it must involve cooperation between off-chain and on-chain. The approval, management, and updating of off-chain assets must be completed by off-chain institutions. If RWA can rise, it can simultaneously drive both on-chain and off-chain development; there is no replacement, but rather a collaborative win-win situation.

RWA has an advantage in Hong Kong, as there are many good targets. For example, the Hong Kong Monetary Authority wants to put charging piles on-chain in the sandbox, which can generate relatively stable cash flow in reality. What I want to express is that Hong Kong is not lacking in good ideas or good assets, but how to implement them, how to promote them to society, and how to develop a regulatory framework that aligns with them may require more detailed consideration.

MetaEra: How do you evaluate the atmosphere and vitality exhibited by student organizations in the current Web 3.0 field? Taking Hong Kong's 0xUClub as an example, we see the active participation and significant influence of the student community in the industry. At the same time, students from the University of Hong Kong and the Hong Kong Polytechnic University have shown great enthusiasm in related activities and startup projects. For these young enthusiasts of Web 3.0, what actions or development paths do you think they should focus on at this stage? What opportunities and challenges will the development of the Web 3.0 industry in Hong Kong bring to students?

Lin Chen: The current Web3 industry still appears to be in its early stages compared to its envisioned goals. Especially this year, with the Federal Reserve issuing spot ETFs based on Bitcoin and Ethereum, it has just begun to be formalized within the regular financial sector, and the future path will undoubtedly be broader.

In terms of challenges, whether it is exchanges, ETFs, stablecoins, or RWA, Hong Kong is still in the forefront of international trends but has not achieved significant scale. If we talk about the impossible triangle in Web3, if scalability has not improved, it is not a major issue for young students and entrepreneurs, as there may still be significant development space.

Additionally, if a large number of students want to pursue careers in Web3, job opportunities are relatively limited, and one cannot expect university graduates to immediately form teams to start businesses. Although there have been many instances of Web3 startups, it is not necessarily a universal phenomenon. Of course, we also notice that more and more Web3 companies want to recruit on campus, and we welcome them to the University of Hong Kong to provide students with choices. I believe this is a two-way selection process; as more young people enter this industry, it will certainly bring new ideas, creativity, and technologies, which can further promote the industry's development. As it develops further, it will attract even more young people, forming a positive cycle.

MetaEra: A few days ago, you shared Hong Kong's strategic positioning in the global Web 3.0 ecosystem at the ForthTech event. Could you elaborate on the role Hong Kong plays in the Web 3.0 field and its future development potential?

Lin Chen: I hope that Hong Kong can have at least a few or one globally leading track among many tracks. Just as we previously mentioned that Hong Kong is an international financial center because it has the highest IPO financing amount each year. If Hong Kong can carve out a new path in Web3 asset management, I believe that the financial development of Hong Kong and the development of the Web3 industry will be a win-win situation. Currently, tens of thousands of people are brought into Hong Kong each year through various talent programs. If stablecoins or RWA assets can be opened up to different levels of people, allowing the entire Web3 to play its role under the framework of asset management in Hong Kong, then the scale of Hong Kong itself can also greatly promote the development of Web3. Therefore, I believe Hong Kong still has great potential to serve as a Web3 wealth management center.

Of course, asset management is just one track. If there are breakthroughs in technology or business models, that would also be excellent. At present, I feel that various aspects are exploring and trying.

Moreover, the development of Web3 is very rapid; just because Hong Kong is not leading now does not mean it won't in the future. Hong Kong's advantage is its ability to attract a large number of high-end talents and gather many individuals with capital allocation needs, so this place is not lacking in popularity. Coupled with regulatory support, developed products can reach more types of people. Therefore, I believe that in a short period, there is an opportunity to ignite the fire of Web3 in Hong Kong. Utilizing the advantages of the Hong Kong SAR to take the lead in exploration, I believe there is great potential for Web3 development.