The era of Web3 Compliance has begun, and exchanges face opportunities and challenges.

Recently, a series of actions in Hong Kong's Web3 field has attracted widespread attention in the industry. It is reported that the Hong Kong Securities and Futures Commission has received more than 80 substantial operation reports, and it is expected that more than 130 virtual asset exchanges will apply for licenses. Although Hong Kong's Compliance policies are relatively lagging, as an international financial center, its potential to embrace Web3 should not be underestimated. Many exchanges choose to set up in Hong Kong, not only focusing on the Web3 track but also valuing the entire financial world's landscape. The path of Compliance, although not as eye-catching as the global marketing of Web3, harbors great potential. If executed properly, it could even change the world landscape.

Limitations of Crypto Exchange Models

Currently, Crypto trading mainly exists in two modes: first, users trade on the exchange with order books, the advantage being fast transaction speeds and the ability to trade standardized products in large volumes, while the disadvantage is that users have lower bargaining power; second, pricing inquiries are conducted in social groups, where the advantage is high asset flexibility, but the disadvantage is the lack of delivery guarantees and the presence of fraud risks. Industry insiders point out that the Crypto trading world lacks tools similar to "over-the-counter trading platforms" in traditional finance. Considering the rapid evolution of the Web3 world, relying solely on the exchange order book trading model is clearly insufficient; there is also a need to develop an All To All pricing inquiry trading model or to replace the existing unsafe trading models with trustworthy methods.

Challenges of Web3 Financial Layout

Under the push of compliance policies in Hong Kong, many traditional financial institutions and practitioners are preparing to lay out Web3 finance. However, this is not an easy task. On one hand, traditional finance lacks understanding of virtual assets and needs time to learn; on the other hand, this field is full of unknowns, and the return on investment is still unclear. At the same time, many Web3 exchanges are also applying for VASP licenses and other relevant licenses in Hong Kong, hoping to achieve synergy with traditional financial clients.

The Potential of CeFi as a Web3 Gateway

For traditional financial investors in Hong Kong, the threshold for DeFi is relatively high, while CeFi is more in line with their usage habits. Traditional investors prefer to open accounts, transfer funds, and trade through familiar methods, whereas the operational processes of DeFi are quite unfamiliar to them. Considering the large investment community in Hong Kong, educating so many users to use Web3 tools is a daunting task. In contrast, CeFi provides traditional financial investors with a lower barrier to entry and an easier option.

Compliance challenges faced by CeFi

Hong Kong's regulatory framework for virtual asset trading is somewhat conservative. For example, the regulations require exchanges to store 98% of customer assets in cold wallets, which places immense pressure on the daily operations of exchanges. More critically, the regulations mandate that exchanges must self-custody customer assets and cannot use third-party custody services. This sharply contrasts with the third-party custody models commonly adopted by current Web3 exchanges, significantly raising the requirements for exchanges in terms of technology, understanding of financial products, Compliance, and asset security.

The Importance of User Education

No matter how we attract users into the Web3 world, user education is an indispensable part. During the process of interacting with users, it is crucial to subtly help them deepen their understanding and communication of Web3.

The Contradictions and Challenges of Web3 Development

The Web3 industry is currently facing a contradiction: projects that can quickly generate profits in the short term often do not align with the work done by long-term builders. The industry is filled with get-rich-quick schemes and speculative behavior, while those who genuinely strive for the long-term development of the industry struggle to gain sufficient attention and support. Solving this contradiction requires support from long-term capital, rather than relying on short-term speculative funds.

The current Web3 environment is overall pessimistic; from the early mining boom to the later exchange and VC-dominated models, the industry has been searching for ways to get rich quickly. However, very few foundational projects that can truly change the industry and the world receive enough support. In the context of global interest rate hikes, the exit of traditional capital poses greater challenges for the industry.

In the future, the development of the Web3 industry may require a combination of "timing, geographical advantages, and harmonious human relations." There is a need for capital that is willing to accompany projects in their long-term growth, supporting teams that truly contribute to the industry. At the same time, as the forefront of financial innovation in China, Hong Kong has unique advantages and opportunities in promoting the development of Web3. If the market's vitality and professionalism can be fully leveraged under policy support, Hong Kong has the potential to occupy an important position in the global digital finance field and make significant contributions to China's financial innovation.