Continued fintech expansion in Hong Kong is just around the corner, with blockchain, digital assets, and distributed ledger technology (DLT) together with artificial intelligence as the major areas of its development.
Today, the city is a global financial hub that has more than 1,100 fintech firms, of which 175 blockchain focused, 111 digital asset and cryptocurrency companies.
It renders it a 250% and 30% increase specifically when compared with 2022 as per the latest Hong Kong Fintech Ecosystem report by InvestHK, the government body overseeing Foreign Direct Investments.
Government Policies and Licensing Drive Web3 Expansion
Active government policies and a flexible licensing regime for crypto exchanges and virtual asset trading platforms are given credit for the city’s rapid growth in the Web3 sector. According to the report, Hong Kong’s fintech market revenue is estimated to climb to a staggering US$606 billion by 2032 with a CAGR of 28.5 percent between 2024 and 2032.
However, industry problems remain. Other Hong Kong authorities surveyed 130 fintech companies within the city along with InvestHK. The first most pressing issue mentioned was Talent shortage that mentioned by 58.8% of respondents and followed by limited access to capital (43.9%). It will be critical for Hong Kong to keep its momentum as a top strong financial hub addressing these hurdles.
More than 73 per cent of the companies eviscerated by AI were using AI solutions. Providing a stark contrast to that 41.5%, which aims at digital assets and cryptocurrency, AI is proving to be essential to the way the sector will move forward.
HKMA’s Master Plan: Building a Global Fintech Hub by 2025
One key advantage to Hong Kong, given its status as a part of China, is that it has stuck to that country’s ‘one country, two systems’ policy. This special governance model allows the city to continue a free market economy with open capital flow and strong trade relation between itself and mainland China, and its proximity to the main land.
This position, the Hong Kong government has leveraged to introduce multiple Web3 innovations including the licensing of digital assets, spot Bitcoin and Ether exchange traded funds (ETFs), and projects such as the Hong Kong Monetary Authority (HKMA)’s stablecoin sandbox and tokenization, the AI integration.
In 2021, the HKMA officially adopted a comprehensive strategy to turn Hong Kong into a premier centre of the financial world by 2025, marking its ambitions to be a global fintech hub.
It includes promoting banks’ fintech adoption, preparing Hong Kong’s readiness in issuing central bank digital currencies at wholesale and retail scale, building on current data infrastructure, expanding the fintech talent pool and drafting of policies to drive the burgeoning fintech ecosystem in the city.
Hong Kong is racing to ride the Web3 and AI wave in fintech the challenge will be to overcome talent and investment challenges to secure its place as a fintech global leader.
