The 2022 Hong Kong Fintech Week is being held this week, bringing together tens of thousands of industry leaders, policymakers and fintech innovators to discuss some of the biggest opportunities in the fintech industry as well as the challenges faced by the sector.

This year’s event, themed “Pushing Boundaries, Reaping Benefits”, is the seventh edition of the flagship event and features over 250 distinguished speakers, 400 sponsors and exhibitors, and more than 30 international delegations.

The main conference, which took place on October 31 and November 01, saw government officials, regulators and industry leaders announce new initiatives and share updates on their ongoing fintech projects.

Hong Kong’s fast-growing fintech sector

The 2022 edition of the Hong Kong Fintech Week kicked off with an opening speech by Hong Kong’s Financial Secretary Paul Chan, who highlighted the phenomenal growth of the city’s fintech industry, which soared from about 180 companies five years ago to now more than 800. He credited the growth to Hong Kong’s open market, rigorous regulatory regime, the rule of law, sophisticated infrastructure, and the free flow of capital and information.

Chan also said that Hong Kong was open and inclusive towards the global community of innovators engaging in virtual asset businesses, highlighting the city’s commitment to establishing a facilitating environment for the development of the virtual asset sector.

Hong Kong changes stance on cryptocurrency

The Financial Services and the Treasury Bureau (FSTB) took the opportunity to issue a policy statement, sharing the government’s stance and approach towards developing a vibrant sector and ecosystem for virtual assets.

Among the key topics covered is regulation, in which the Securities and Futures Commission (SFC) said it will conduct a public consultation on how retail investors should be given a suitable degree of access to virtual assets, and how the jurisdiction should develop exchange traded funds (ETFs) on virtual assets.

The government will also introduce a new licensing regime to attract global virtual asset service providers, review property rights for tokenized assets and the legality of smart contracts, as well as undertake pilots on virtual assets including non-fungible token (NFT) issuance, green bond tokenization, and e-HKD, a digital currency project launched in 2021, officials said during the 2022 Hong Kong Fintech Week.

HKMA announces new fintech initiatives

The first day of the main conference saw the HKMA announce a flurry a new initiatives designed to spur fintech development.

The HKMA said it will pilot a tokenized government green bond issuance system to test out the use of distributed ledger technology (DLT) to issue bonds in Hong Kong. On the retail front, after releasing a position paper on e-HKD in September 2022, the HKMA said work has commenced under the “three-rail approach” to prepare for the possible issuance of e-HKD in the future.

To further enhance the Fintech Supervisory Sandbox (FSS), the HKMA is collaborating with Cyberport to pilot FSS 3.1, a new track of the funding scheme, to assist in the commercialization and wider adoption of the successful projects under Cyberport’s Fintech PoC Subsidy Scheme.

On regtech and suptech, the central bank said a new Regtech Connect session will be organized in the coming months. Cyberport tech firms will be invited to share their perspectives with participating banks in the use of anti-money laundering (AML) regtech.

It also said it will be applying an AML suptech tool to test how network analysis on mule accounts can assist in understanding how and where risks move across the banking sector. The tool will use uses granular data from multiple bank, a first in Hong Kong. The goal here is to prevent bank accounts from being abused for fraud and protect customers from financial crime losses, the HKMA said.

Other recent initiatives include the upgrade of the Fintech Career Accelerator Scheme (FCAS) to FCAS 3.0 through partnering with the Insurance Authority, as well as the completion of two pilot trials involving cross-boundary account top-up and cross-border e-appointment for account opening in the Greater Bay Area (GBA).

Ensuring privacy protection in central bank digital currencies

During his keynote presentation, Yi Gang, Governor, People’s Bank of China (PBoC), said that the eCNY digital currency is intended to meet domestic payment needs, enable the development of inclusive finance, as well as improve the efficiency of the currency and payment system.

Launching a retail central bank digital currency (CBDC) is a delicate affair, Yi said, noting that a fine balance must be struck between protecting privacy and combatting illicit activity.

In the case of eCNY, Yi said the PBoC restricts the digital currency to authorized operators, who collect only the information necessary for their exchange and circulation services. Personal information security is assured through advanced technology and strict management, in full adherence with consumer privacy protection laws and regulations. Encrypted sensitive information is de-identified to all non-transacting parties. Entities and individuals are prohibited from arbitrary enquiries without legal authorization.

Yi also said the PBoC is working with the HKMA and other monetary authorities on CBDC.

Top fintech investment trends

During a panel session moderated by HKMA Chief Investment Officer (Private Markets), Samson Wong, top venture capitalists from GGV Capital, Gobi Partners and Kenetic, shared what they believe are the biggest trends in the fintech space.

Thomas G. Tsao, Founding Partner, Gobi Partners, told the audience to start looking south because Southeast Asia is a very large market, with mostly young and innovative individuals. China is also an interesting market considering that the country has entered its third phase of development, he said.

Jehan Chu, Co-Founder & Managing Partner, Kenetic, highlighted the opportunities brought about blockchain technology, naming Web 3.0 in particular.

Jenny Lee, Managing Partner, GGV Capital, advised to look for companies that are innovative and which stand out from the crowd. It is also important to be growing at manageable costs, with foreseeable and reachable return on investment (ROI), she added.

HKMA and Bank of Israel’s CBDC project

During a panel discussion featuring Nelson Chow, Chief Fintech Officer, Fintech Facilitation Office, HKMA, and Yoav Soffer, CBDC Project Manager, Bank of Israel, the speakers shared the CBDC project the two central banks have been working on.

The project seeks to create CBDCs, with the overall ambition to create a one-stop shop for digital payments. By creating CDBCs, the general public will find digital banking and transactions with merchants to be more accessible, since everything will be unified into one digital currency, the speakers said.

Attracting foreign fintech leaders and talent

In his opening keynote address on the second day of the main conference, Secretary for Commerce and Economic Development, Algernon Yau, stressed that the government is embracing a more proactive approach in “competing for enterprises and talents”. He unveiled a number of initiatives designed to attract enterprises, investment and talents.

On the investment promotion side, Yau said the government will establish by the end of the year the Office for Attracting Strategic Enterprises (OASES). The office will be led by the Financial Secretary and will focus on attracting high-potential and representative strategic enterprises from around the globe by offering special facilitation measures and one-stop services.

The government will also set aside HK$30 billion (US$3.8 billion) from the Future Fund to establish the Co-Investment Fund within this year for attracting enterprises to set up operations in Hong Kong and investing in their business, he said.

Fostering innovation

In his keynotes remarks, Secretary for Innovation, Technology and Industry, Professor Sun Dong, highlighted the critical role Cyberport and the Hong Kong Science Park – two flagship innovation and technology organizations in the city – have played in driving fintech development.

Today, Cyberport hosts the city’s biggest fintech community with about 400 companies covering blockchain, mobile payment, artificial intelligence (AI), and more.

The Cyberport 5 expansion project, which is expected to be completed in 2025, will increase the gross floor area of Cyberport by over 40%. Different clusters, including fintech, could benefit from the enhanced development capacity, he said, and help deliver “more ground-breaking fintech innovations in the near future.”

Efforts are also being made to enable more data sharing. The HKMA is developing at full steam the Commercial Data Interchange (CDI), a centralized platform for enterprises, particularly small and medium-sized enterprises (SMEs), to authorize service providers such as payment systems, public bodies or utility companies to furnish banks with data.

The Office of the Government Chief Information Officer will soon begin exploring the development of a standardized API to enable data sharing by more government departments through the CDI, he said.

Finally, Dong concluded his speech by sharing that the government will strive to enhance its innovation and technology ecosystem by earmarking additional funds to support commercialization of research and development (R&D) results. Efforts will also be made to enlarge the tech talent pool by attracting top-notch talent to Hong Kong and enhancing existing technology talent schemes.

Opportunities in the Greater Bay Area

Nicolas Aguzin, Chief Executive Officer, Hong Kong Exchanges and Clearing, characterized the GBA as one of the most exciting economic development zones in the world, noting that the region had all the right conditions to be a sandbox for what he refers to as “the Big Bang of finance”.

Echoing Aguzin, Jessica Tan, Co-CEO & Executive Director, Ping An Group, said that, as a “leading innovation powerhouse”, the GBA held enormous potential and a wealth of prospects due to its energetic and innovative young talent.

Ant Group and InvestHK team up on talent development program

During a panel discussion, Jason Pau, Senior Director, Ant Group, announced a strategic partnership with Invest Hong Kong (InvestHK) on a global fintech training platform called 10×1000 Tech for Inclusion (10×1000). The initiative aims to enhance talent development, improve the quality of MSMEs, increase female participation, and promote the digital economy in Hong Kong.

Ant Group and InvestHK will recruit and train at least 1,000 “emerging talent and tech leaders” annually for at least ten years, Pau said, and expose them to “the best case studies from China.”

BaseBit.ai wins 2022 Global Fast Track Pitch Competition

Global Fast Track is a startup program with a business matching portal, a pitching competition, and mentoring sessions. The program aims to connect global fintech companies with a diverse range of Asian corporates, investors and service champions to explore potential business partnerships and investments.

This year’s Global Fast Track Pitching Competition attracted more than 400 applications, Charles Ng, Associate Director-General of Investment Promotion, InvestHK, said.

Of the top 10 finalists selected on the first day of the 2022 Hong Kong Fintech Week, a final winner was chosen: BaseBit.ai, a Chinese high-tech company focused on data and AI.

BaseBit.ai has built an open data ecosystem and data sharing collaborative environment based on data security and personal privacy protection for healthcare, finance, government and other industries.