The era of Web3 compliance is coming, and exchanges are facing new opportunities and challenges.

Recently, a series of initiatives in Hong Kong's Web3 sector have attracted widespread attention within the industry. It is reported that the Hong Kong Securities and Futures Commission has received over 80 substantial operation reports, and it is expected that more than 130 virtual asset exchanges will ultimately apply for VASP licenses. Although Hong Kong's compliance policies are relatively lagging globally, its status as an international financial center makes many people optimistic about its future development in the Web3 field.

Many exchanges choose to take a compliance route in Hong Kong, not only focusing on the Web3 sector but also eyeing a broader financial landscape. Although the current progress may not be as eye-catching as the global marketing of Web3, the potential behind it is enormous, and if executed properly, it could even change the global landscape.

Limitations of Crypto Exchange Models

Currently, Crypto trading mainly has two modes: one is users trading on the exchange with the order book, which is fast but lacks bargaining power; the other is inquiry trading in social groups, which has flexibility but poses security risks. This situation reflects the lack of tools similar to "over-the-counter trading platforms" in traditional finance in the Crypto trading world.

Considering the rapid development of the Web3 world, relying solely on the exchange order book trading model is clearly insufficient. Industry insiders believe that an All To All inquiry trading model should be introduced, or a trustless method should replace the unsafe trading practices in existing social groups.

The Layout Challenges of "Web3 Finance"

With the promotion of compliance policies in Hong Kong, many institutions and individuals with traditional financial backgrounds are preparing to enter the Web3 financial sector. However, this process is not easy. Firstly, traditional finance has limited understanding of virtual assets, requiring time to learn and adapt. Secondly, this field is full of uncertainties, and the return on investment is still unclear.

At the same time, many Web3 exchanges are applying for VASP licenses and other relevant licenses in Hong Kong, hoping to establish collaborative relationships with traditional financial clients.

CeFi: A New Path for Web2 to Enter Web3?

For traditional financial investors in Hong Kong, the threshold for DeFi is relatively high. In contrast, CeFi is more in line with the usage habits of these clients, has a lower threshold, and is easier to get started.

However, it is not easy to operate compliant CeFi in Hong Kong. Regulatory requirements demand that exchanges self-custody customer assets and not use third-party custody services. This places high demands on the exchange's technical level, understanding of financial products, compliance awareness, and asset security management capabilities.

Nevertheless, some exchanges are considering leveraging Hong Kong's compliance policies to create a user education pathway from CeFi entry to DeFi advancement, helping traditional investors gradually integrate into the Web3 world.

The Significance and Challenges of Building Web3

The Web3 industry is currently facing a contradiction: projects that can quickly generate profits in the short term often do not align with the goals of long-term builders. Many dedicated developers may find it difficult to profit in the short term, while some highly speculative projects can quickly attract funding. This situation needs to be improved with the support of long-term capital.

In the context of global interest rate hikes, the Web3 industry is facing the challenge of tightening funding. To address this issue, new liquidity must be introduced, which tests the ability of projects and teams to choose in the next wave of narratives. The industry needs capital that is willing to accompany projects in their growth over the long term and contribute to the development of the industry.

Despite facing numerous challenges, Hong Kong, as China's financial frontier, still has immense potential in the forward-looking Web3 industry. Digital currencies could become a breakthrough, and if the Hong Kong government can adhere to its established plans, combined with the professionalism and vitality of the local market, it is expected to occupy an important position in the global financial landscape and make significant contributions to industry development.