2019 was a rough year for many Chinese technology companies, having been victimized by unintended fallout from the US-China trade war, which seems to be slowly degenerating into a “new Cold War”.

2019 also proved to be one of Hong Kong’s most traumatic periods. And 2020 is not being any easier either for Chinese mainland technology companies, or for Hong Kong: Mainland technology companies are suffering from the Trump administration’s China obsession — a very recent example being US President Donald Trump’s threatening sweeping restrictions on TikTok and WeChat — and Hong Kong suffered an intense third wave of COVID-19 in the midst of a recently approved National Security Law.

But this international financial center, renowned for its resilience, is primed to grasp any opportunity that promises to secure its regional financial dominance.

In this sense, the coronavirus will undoubtedly turbocharge Hong Kong’s financial technology revolution. COVID-19 is changing consumer behavior, quite likely forever, and Hong Kong’s banking and financial services industry urgently needs to adapt. Digital transformation with artificial intelligence has quickly become the top priority for those not wanting to be left behind.

Fintech is fostering innovation in financial services globally and changing the nature of commerce and user expectations for financial services. It is commonly considered to cover the application of AI, blockchain, cloud computing and big data in areas such as payments, clearing and settlements, deposits, lending and capital raising, insurance, investment management, and market support.

In this sense, as I mentioned in my article “HK should leverage Bay Area to become a fintech hub like Singapore” (June 20, 2019), Hong Kong is developing itself into a leading fintech hub. Its fintech industry has the potential to develop much faster now if it can leverage its involvement in the Guangdong-Hong Kong-Macao Greater Bay Area blueprint, and also now that COVID-19 is changing consumer behavior.

One of the many technologies within the fintech area that will play a key role in the future is blockchain, and more specifically, cryptocurrencies.

Hong Kong, as an international banking and financial hub, is ready to embrace blockchain technology and become a leader in fintech. Over these past few years, Hong Kong’s blockchain startups have been steadily growing and showing that they can become an important player in the city’s banking and financial system.

In that same article, I also mentioned that there is a tendency among many Hong Kong residents to compare Singapore favorably with Hong Kong.  

If that’s the case, what has Singapore done regarding cryptocurrencies that is worthy of emulation? Singapore’s new payments law came into force on Jan 28 and it requires all crypto businesses operating in the country to be registered and licensed. The Monetary Authority of Singapore said the new law will strengthen consumer protection and promote confidence in the use of electronic payments. 

Singapore is one of the most important Asian countries for the crypto sector due to its regulatory-friendly environment. There are at least 153 crypto and blockchain companies headquartered in Singapore, across 27 different subcategories, according to The Block Research.

What about Hong Kong? The Securities and Futures Commission issued in November 2019 a position paper, setting out a new regulatory framework for virtual-asset trading platforms. The SFC will only grant licenses to platform operators that are capable of meeting robust regulatory standards, comparable to those which apply to licensed securities brokers and automated trading venues but also incorporate additional requirements to address specific risks associated with virtual assets.

The blockchain and crypto sector seems to be blooming in Hong Kong: More blockchain companies set up shop in Hong Kong in 2019 than firms from any other fintech subsector, according to a report from the region’s Financial Services and the Treasury Bureau. Actually, nearly 40 percent of new fintech firms launched in Hong Kong over the past year are operating in the blockchain sector.

In this sense, Cyberport and the Fintech Association of Hong Kong are two examples, among others, of three kinds of entities that are promoting fintech-related innovation in Hong Kong.

Cyberport is managed by Hong Kong Cyberport Management, which is wholly owned by the Hong Kong SAR government, and it is the flagship of Hong Kong’s digital tech industry.

It houses about 600 tech companies, of which 200 are non-local. According to data provided by InvestHK, Cyberport’s publicly funded incubation program admitted 108 new startups in 2018-19. It has achieved an impressive survival rate of 72 percent. One of these companies, iX Asia, launched the first Hong Kong cryptocurrency index, ixCrypto Index, together with its mentees from the University of Hong Kong in 2018 — which is just one more of countless examples of how Hong Kong-based companies keep innovating all the time.

And, at last, the Fintech Association does a remarkable job in promoting fintech. It is a nonprofit organization with an independent structure, led by a volunteer group of board members and committee co-chairs who care about the future of fintech in Hong Kong, China and Asia.

What do companies need to innovate? Bright people and ideas, of course, but most importantly — stability. That’s why the National Security Law was required to give potential investors a boost of confidence in Hong Kong’s long-term prospects. The law ensures that the devastating social unrest of last year can never be repeated.  

To sum up, given the current tense economic and political situation, and given the city’s status as a leading financial center, it is in Hong Kong’s best interest to grasp every opportunity.

The author holds a doctorate in real estate law and economics, and has worked as a business analyst in Hong Kong.

The views do not necessarily reflect those of China Daily.