Hong Kong's Cryptocurrency 3.0: Who are the potential top players?

In 2023, the weight of the two characters "Hong Kong" became even heavier.

On June 1st, Hong Kong officially implemented the new regulations for virtual asset trading, "Guidelines for Virtual Asset Trading Platform Operators", and opened the application for virtual asset trading platform operation licenses. Industry insiders generally believe that this is a historic moment for Web3 and for Hong Kong.

Since the Hong Kong Securities and Futures Commission released the "Policy Statement on the Development of Virtual Assets in Hong Kong" at the end of last year, Web3 practitioners have flocked to Hong Kong. From the occurrence of large-scale industry gatherings with tens of thousands of people, to the dynamic announcements of top encryption companies laying out in Hong Kong, to the periodic rise of Hong Kong concept coins, the importance of "Hong Kong" to the industry and its long-term impact on the global Web3 regulatory development are self-evident. However, in the short term, the biggest significance of the new regulatory policy in Hong Kong is to lead the cryptocurrency market into the 3.0 stage.

What is "Hong Kong Cryptocurrency 3.0"?

Regarding "Hong Kong Cryptocurrency 3.0", simply put, it is a new development cycle for the cryptocurrency market that is divided based on the compliance process. As the current focus is mainly on centralized exchanges (CeFi) applying for Hong Kong VASP licenses, it can also be temporarily understood as "CeFi 3.0". (The VASP license referred to in this article refers to the broad virtual asset service provider license. The new regulations in Hong Kong are complicated and constantly being optimized, and will not be elaborated on too much.)

Compared to the 1.0 stage of driving out good coins with bad coins, and the potential systemic risks brought by the monopoly and factional struggles in the 2.0 stage, the fundamental change of the 3.0 stage is that the cryptocurrency market is gradually becoming orderly under the joint "supervision" of internal and external parties.

Internally, it is mainly reflected in the self-regulatory culture advocated and continuously implemented by top exchanges such as Binance and OKX, such as regular public disclosure of platform reserve fund certificates, which to a certain extent promotes the transparency of industry funds. Externally, it is reflected in the government regulatory level. With the implementation of the new regulations by the Hong Kong SFC, the cryptocurrency market is gradually opening up to a wider range of investors within the regulatory framework.

In order to catch up with the new opportunities brought by the new regulations of Hong Kong regulators, many related trading platforms have applied for licenses at the first time.

According to publicly available information, the current players in the field mainly include: OKX, BitMEX, BitMart, bitget, Huobi, Gate, Meex, MetaTdex, CoinEX, CoinW, as well as HashKey and OSL, who hold the No.1 and No.7 cards. In addition, traditional financial institutions such as ZhongAn Bank, Tiger Securities, and Huasheng Securities have all expressed their intention to expand their business in this area.

Without a doubt, the "HK" narrative has once again livened up the calm market.

Application for License, Who is the Potential Top Player?

Yesterday, KOL Bitcoin enthusiasts initiated a poll on Twitter to guess which exchange will be the first to obtain the VASP license. Although the sample size of the poll is limited and cannot fully represent the market's real expectations, it still has some reference value.

As of the time of writing, OKX has the highest number of votes, followed by Binance and Huobi.

Surprisingly, while CeFi is flooding into the "Hong Kong Cryptocurrency 3.0" stage, Binance has not yet announced any layout dynamics related to the business, only publicly expressing some views on Hong Kong regulation.

OKX, BitMEX, Huobi, and Bitget have successively launched "HK" version apps last week as transitional services during the application for the Hong Kong Virtual Asset Service Provider (VASP) license. Some exchanges have also opened up some token trading to retail investors. In addition, OSL and Hashkey have not yet opened trading to retail investors as they are only allowed to open to professional investors due to their possession of the No. 1 and No. 7 licenses.

As we all know, Hong Kong has always been cautious in terms of regulation. The licensing application process for the aforementioned platforms is unlikely to be fast. In addition, the threshold for applying for a VASP license is not low. Applicants need to meet strict regulatory standards under the VASP system, including compliance with anti-money laundering regulations and ensuring the safety and transparency of user assets. Essentially, this is a comprehensive test of the applicant's overall strength.

For example, whether there is a sound risk control system to cope with market fluctuations and potential risks? Is the security of user assets guaranteed? How is the transparency and liquidity of funds? Does the platform have sufficient trading depth? How is the innovation ability? Can it adapt to the constantly changing needs of investors? What is the industry contribution value? Does it have a sense of industry responsibility? How is the market influence? Is the risk assessment satisfactory? Does it have brand effect? The measurement standards involve various aspects, but currently there are not many quantifiable indicators.

The Block data shows that since February this year, Binance's market share in the spot trading market has dropped to 47%, while OKX and Coinbase have shown an upward trend, ranking second and fourth respectively in terms of market share.

According to Coinglass data, as of now, the 24-hour trading volume of cryptocurrency exchanges shows that Binance ranks first with a volume of 33.29 billion US dollars, OKX ranks second with a volume of 11.058 billion US dollars, BitMEX ranks third with a volume of 0.571 billion US dollars, and Bitget ranks sixth.

According to Defillama CEX transparency data, Biannce has a fund precipitation of 63.62 billion US dollars, ranking first, OKX has a fund precipitation of 9.91 billion US dollars, ranking second, Huobi has a fund precipitation of 2.95 billion US dollars, ranking fifth, Bybit has a fund precipitation of 2.94 billion US dollars, ranking sixth, KuCoin has a fund precipitation of 2.59 billion US dollars, ranking ninth, and Gate and Bitget rank tenth and eleventh.

According to Nansen data, mainstream exchanges that have been updating their user asset reserve proofs (POR) on a monthly basis since their initial release include Kucoin (May 31), Binance (May 23), OKX (May 19), MEXC (May 13), Bitget (May 6), and Bybit (April 14). Gate has not actively released any updates for a long time. In addition, Huobi has resumed updates in May, and this reserve is 50% lower than the reserve announced on November 12, 2022, with a decrease of 16,000 BTC.

除上述可视的数据指标外，有业内人士普遍认为 OKX 的产品的创新力较为领先，其次是 Bitget，两家都自主研发了 Web3 钱包，产品体验上佳，但 OKX 的行业贡献值较高，其近期正大力投入 brc20 等比特币生态所需基础设施建设上，备受推特用户欢迎；HashKey 和 OSL 则具在牌照申请上具有一定优势，因为二者是过去几年仅有的成功申请到 SFC1 号牌和 7 号牌的交易平台，尤其 HashKey，在今年 4 月香港峰会期间的媒体关注非常高。

In addition to the visible data indicators mentioned above, industry insiders generally believe that OKX's product innovation is more advanced, followed by Bitget. Both have independently developed Web3 wallets with excellent product experience. However, OKX has a higher industry contribution value and has recently invested heavily in the construction of basic infrastructure required for the Bitcoin ecosystem, such as brc20, which is highly welcomed by Twitter users. HashKey and OSL have certain advantages in license applications because they are the only trading platforms that have successfully applied for SFC1 and 7 licenses in the past few years. Especially HashKey, which received high media attention during the April Hong Kong summit this year.

Overall, OKX has the strongest comprehensive strength, mainly reflected in the hard power of its products and good market reputation, with huge potential to become the top player in the CeFi 3.0 stage. At the same time, Bitget has also demonstrated its ambition this year, continuously exerting efforts in business layout, showing signs of catching up with Binance and OKX.

Of course, the new regulations have just been implemented and there are still many variables in the future development. Although the market is currently optimistic, some KOLs point out that Hong Kong's compliant exchanges may face the dilemma of having neither retail nor institutional users. Looking back at the history of Hong Kong's financial development, some concerns are reasonable, but if we extend the timeline, Hong Kong may only be the starting point of cryptocurrency 3.0, and there will be more to come. Thinking of an old law: "Pessimists are often correct, optimists are often successful", be patient and wait for the wind.

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia