Hong Kong: China’s Web3 Wallet Gateway

Web3

Web3 in Hong Kong: China’s Gateway to Digital Assets and Web3 Wallets

Introduction

The future of international finance is being drastically changed by Web3, and Hong Kong is establishing itself as a major participant in this change. The city has a distinct regulatory advantage within China because of its "one country, two systems" framework, which permits more progressive policies about digital assets and decentralized technologies.

Beyond regulatory clarity, Hong Kong is a desirable base for blockchain startups because it has one of the lowest corporate tax rules in the world, with profits tax capped at 8.25% for the first HK$2 million and 16.5% after that. The city's innovation ecosystem is further enhanced by Cyberport and the Hong Kong Science and Technology Parks Corporation (HKSTP), which offer capital, infrastructure, and mentorship to growing Web3 and fintech businesses.

With Singapore becoming a rival Web3 hub and regional competition increasing, Hong Kong is increasing its dedication to crypto-friendly policies, virtual asset service provider (VASP) licensing regimes, and crypto-friendly policies. Hong Kong is becoming a popular location for Web3 wallet startups and decentralized finance platforms due to its financial transparency, government assistance, and legal stability.

What Are Web3 Wallets?

Web3 wallets are digital keychains that enable users to manage digital assets—like cryptocurrencies, tokens, NFTs—and navigate decentralized applications (dApps). Unlike centralized systems such as WeChat or AliPay, Web3 wallets give users full control of their keys and identity. They serve as both your digital bank account and online identity, supporting secure, peer‑to‑peer transactions.

The Operation of Web3 Regulation

The LEAP framework, which covers stablecoins, real-world asset (RWA) tokenization, and licensing for virtual asset service providers, has helped Hong Kong accelerate its digital asset strategy. Additionally, it passed the Stablecoin Bill, which formally regulates stablecoins backed by fiat money. This all-inclusive framework, which addresses trading, custody, staking, and tokenization, provides institutions and startups with a safe haven in which to experiment.

Prominent industry figures who have advocated for these regulatory measures include Stephen Browne, a former lawyer who is now the CEO of Sorted Wallet and an active founding member of Sors Digital Assets and Defactor. He has moderated panels on RWA tokenization, publicly pushed for Web3 clarity, and is still boosting trust in Hong Kong's decentralized finance system.

"Hong Kong’s Global Advantage Over Mainland Apps."

WeChat and Alipay, two domestic apps from China, are less accessible to users worldwide because they require local accounts and are subject to stringent national regulations. Web3 wallets, on the other hand, are borderless and decentralized, allowing for truly international transactions free from centralized control.

Additionally, in August 2023, PayPal launched PayPal USD (PYUSD), its own stablecoin backed by the US dollar. PYUSD was introduced as an ERC-20 token that is 1:1 redeemable and facilitates payments and transfers through PayPal and external wallets. It is fully backed by U.S. dollar deposits, short-term Treasuries, and cash equivalents.

This action highlights a developing trend that Hong Kong is embracing as part of its vision for Web3-ready infrastructure: the blending of mainstream finance with decentralized systems.

The Rise of Hong Kong as China’s Web3 Innovation Hub

Hong Kong is fast becoming the testing ground for China's future in digital finance. Under the guidance of the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), the region is opening regulated pathways for Web3 adoption, making it a hotbed for innovation. Here's how that vision is unfolding:

1.Crypto-Focused Business Formation:The report claims that in the middle of 2023, Hong Kong started permitting platforms with licenses to provide cryptocurrency trading to individual investors. To take advantage of the region's strong financial infrastructure and clear regulations, both new and established businesses are registering as Virtual Asset Service Providers (VASPs). Notably, international exchanges like XT.com, one of the first socially integrated digital asset platforms in history, have increased their operations in Hong Kong in order to take advantage of its pro-Web3 regulations and draw in both institutional and retail users.

2. Binance Futures Banned

Although spot cryptocurrency trading is permitted in Hong Kong, many platforms, including Binance, are not permitted to provide derivatives services there. In 2021, Binance stopped allowing Hong Kong users to open new futures and margin accounts, and it phased out existing positions within ninety days.

This emphasizes the need for local regulations to exercise caution when it comes to high-risk instruments.

3.Staking & DeFi Services Under Legal Frameworks: With the SFC releasing detailed guidelines for crypto operations, platforms in Hong Kong are exploring DeFi features such as token staking, stablecoin investment products, and tokenized bonds while staying compliant. These offerings will help diversify investment options for both individuals and institutions.

4.Institutional Digital Asset Adoption: A growing number of Hong Kong-based companies are beginning to hold digital assets in their corporate treasuries. For example, HashKey Group, a major crypto player licensed in the city, has launched digital asset custody solutions for enterprises. This reflects a broader trend of Web3 adoption by mainstream financial institutions .

5. Yat Siu's Role in Animoca Brands

Based in Hong Kong Yat Siu co-founded Animoca Brands, which has been added to the government's Task Force on Promoting Web3 Development, indicating high-level backing for blockchain innovation.

Additionally, the company is pursuing a HK$-backed stablecoin through a joint venture with Standard Chartered and HKT.

6. Cross-Border Web3 Transactions: Hong Kong acts as a gateway for mainland Chinese users to access stablecoins, blockchain-based apps (dApps), and crypto infrastructure. While such activities are still tightly restricted on the mainland, users and companies are setting up compliant channels through Hong Kong to explore Web3 legally and securely.

This model positions Hong Kong as a regulatory sandbox—a controlled environment where innovation can flourish while the state observes and mitigates potential financial risks, like capital outflows or misuse of digital currencies. As noted in a Reuters article, this approach is not only deliberate but also aligned with China’s broader economic goals of safe fintech integration.

Web3 Regulation: Balance of Innovation and Oversight

Officials are carefully implementing robust monitoring tools—mandatory oversight and AML controls—to prevent misuse while allowing digital asset adoption.

Hong Kong also allocates HK$50 million yearly to boost Web3 innovation, including research, incubation, and education programs.

Hong Kong Crypto Hedge Funds: Improving Market Liquidity

Thanks to new laws, licenses, and tax incentives designed to draw in institutional investors, Hong Kong is quickly emerging as a crypto hedge fund hotspot.

  • Tax incentives available: The Hong Kong government is suggesting that family offices, hedge funds, and private equity firms be exempt from paying taxes on cryptocurrency gains. The goal of this action is to increase the liquidity of digital assets in the city's markets.

  • Improved clarity of regulations: The SFC has loosened regulations pertaining to the investment in virtual assets. As long as they trade on authorized platforms, funds are now permitted to allocate more than 10% of their net asset value to cryptocurrencies. This modification provides a more transparent plan for hedge fund participation.

  • Crypto product windows opening: Hong Kong regulators are considering the issuance of stablecoins, margin lending, derivatives, and crypto ETFs are all instruments that increase liquidity for investors and hedge funds.

  • Growing institutional interest: Companies licensed to run exchanges and custody services include HashKey and OSL. In the meantime, there are indications that international hedge funds and family offices are becoming more interested in Hong Kong cryptocurrency exposure.

The Rise of Digital Gold

Bitcoin as "digital gold" resonates with China’s cultural affinity for gold—durability, scarcity, and trust. As more nations treat Bitcoin and stablecoins as reserve assets, Hong Kong is establishing a foundation for China's entry into this space via its regulated Web3 framework.

Hong Kong is also exploring tokenized government bonds and ETFs, aligning traditional investment tools with decentralized finance.

Conclusion

Hong Kong is not just preserving its financial edge—it is redefining it for a Web3-driven future. With transparent licensing, blockchain-ready infrastructure, and a clear pathway for stablecoins and digital assets, it stands as China’s gateway to Web3 wallets.

By combining historical financial synergy with decentralized innovation, Hong Kong is poised to unlock a new era of cross-border opportunity and digital empowerment.