The Hong Kong government issued the Policy Declaration on the Development of Virtual Assets in Hong Kong at the end of last month to support and actively promote the development of virtual assets in Hong Kong. The CSRC immediately considered or relaxed the participation of retail investors in virtual assets investment. However, in recent days, the world's second largest cryptocurrency exchange FTX went bankrupt and the stable currency luna also collapsed and plummeted earlier. Virtual asset investment may have been in a "high wind and high waves". Some market participants questioned that the development of virtual assets in Hong Kong started too late and missed a good opportunity. It is also pointed out that it is not necessarily a bad thing to start late. High risk events of cryptocurrency can help improve investors' risk awareness. Some analysts also believe that the Hong Kong government does not need to rapidly develop Hong Kong's virtual assets in the form of "surpassing the UK and catching up with the US".

Leap down the Lion City, "No need for wind and high waves to race first"

Li Zhaobo, an honorary teaching and research scholar of the Asia Pacific Institute of Business and Economics of CUHK Business School, believes that the Hong Kong government is actively developing virtual assets. It is very likely that the current development of this aspect lags behind that of Singapore. He believes that the Hong Kong government does not need to promote the development of Hong Kong's virtual assets in order to "surpass the UK and catch up with the US". He said: "Migratory birds need to eat the wind to run fast. These birds may not be able to run first in the end. It is unnecessary to run first when the wind is high and the waves are strong. You can catch up and fall behind when the situation is stable."

Deng Shengxing, chairman of the Hong Kong Stock Analyst Association, said that although the development of virtual assets in Hong Kong has some backwardness, it is not necessarily a bad thing. "After the bankruptcy of FTX and the collapse of some cryptocurrencies, investors have a clearer understanding of virtual assets and a higher risk awareness." He also pointed out that the development of the virtual asset market in Hong Kong is conducive to the long-term development of China's finance.

Look at the development pace of Hong Kong's virtual assets and FTX events

·The government issued a policy declaration on the development of virtual assets in Hong Kong on October 31 to promote the sustainable development of various financial services in virtual asset issuance, token, trading and payment platforms, finance and asset management, and depository.

·On the same day, the SFC will launch a public consultation on the appropriateness of retail investors trading virtual assets. The CSRC pointed out that it would allow ETFs of virtual monetary assets to be listed in Hong Kong for retail trading.

·At present, Hong Kong's virtual assets are only allowed to participate by professional investors and are still popular. The virtual asset funds purchased through overseas platforms have increased from 8 million yuan in 2020 to 10 billion yuan in 2021.

·FTX, the world's second largest cryptocurrency exchange, had a sudden financial crisis at the beginning of November, which led to a squeeze. At one time, the leading currency of the exchange planned to be a white warrior, but only one day it withdrew. FTX soon filed for bankruptcy protection.

·Sam Bankman Fried, the founder of FTX, is faced with the "reset" of his wealth. The value of his shares in FTX is up to 16 billion dollars.

Hong Kong has the advantages of China's gateway to serve the world

Zeng Peilin, chairman of Zeng Group in the Hong Kong Family Office, said that virtual asset investment has great potential. He believed that it would not be too late for Hong Kong to start developing virtual assets at any time. He welcomed Hong Kong to accelerate the development of official virtual assets. He is optimistic about the development of virtual assets and technology in Hong Kong. The Hong Kong government can follow the example of the United Arab Emirates and Singapore in this field. In addition, Hong Kong's financial system and its advantages as a gateway to China make it possible for Hong Kong to provide efficient services to the global financial community.

Securities industry: not only monetary NFT is still acceptable

Deng Shengxing believes that investors should not equate virtual assets with cryptocurrency. At present, most of the negative news about the bankruptcy and collapse of the exchange comes from cryptocurrency. However, virtual assets include not only cryptocurrency, but also NFT, securities token issuance (STO) and other products. These products are supported by corporate bonds, works of art and other real values. The volatility and risk are smaller than cryptocurrency without real value. He suggested that Hong Kong should standardize the development of virtual assets, and investors should also conduct virtual asset transactions in investment institutions licensed by the CSRC to ensure security.

Li Zhaobo also said that in the FTX bankruptcy event, even Singapore sovereign fund Temasek also lost more than 2 billion yuan, which implied the high risk of virtual assets. He said: "Even Temasek, a professional investor, has lost hands, and ordinary investors may have more difficulty in distinguishing the risks of investing in virtual assets." Li continued to point out that virtual assets are changing rapidly and it is difficult for legal supervision to keep up with the development. He suggested that the government should carefully evaluate the security issues when developing virtual asset trading, and then develop retail investors, while strengthening investor education.