It has been a tumultuous couple of years for the bustling fintech scene as well as Web3 startups in Hong Kong. As the world grappled with the fallout of the COVID-19 pandemic, US-China tensions, and Hong Kong itself came to terms with street protests that saw its autonomy as a critical financial hub in the Asia Pacific region called into question, the island-state has still managed to grow its fintech startup ecosystem from strength to strength in the intervening years.
In fact, Hong Kong’s fintech landscape rose from eighth to among the top five in the world between 2020 and 2021, in spite of all the uncertainty. The Chinese special administrative region joins Singapore as the only other Asian territory in the top five, alongside California’s Silicon Valley, New York City, and London.
There are now over 600 fintech startups operating in Hong Kong, and they cover the gamut of financial service and operation innovation, harnessing technologies like AI, blockchain, credit facilities and big data to keep the Hong Kong fintech startups landscape on the cutting edge of commercial fintech applications.
But during the Hong Kong Fintech Week 2022, measures were outlined to solidify Hong Kong as an international cryptocurrency hub, and much was said by the Financial Secretary and the Hong Kong Monetary Authority (HKMA) about the territory’s startups progression in harnessing blockchain protocols to create innovative products and solutions in tandem with Web 3.0 technologies cryptocurrencies, decentralised finance (DeFi), metaverse, NFTs, and stablecoins, among others.
Here we look at five Hong Kong fintech startups with Web3 elements that are on the forefront of harnessing virtual assets in groundbreaking ways, and are transforming the regional fintech sector not just today, but for the future. Two of the biggest brands pushing development in the Web 3 startups space, The Sandbox and its parent Animoca Brands, are not featured in this list as while they have been very active in investing and broadening the portfolio of NFTs and metaverses with fintech applications, they are not primarily fintech startups at their core.
Cross-border payments infrastructure provider, XanPool, is accelerating expansion plans worldwide after raising US$41 million this year from investors led by London-based Target Global.
The company will use the new capital to grow its team, build new features and expand its geographical footprint across Europe, the Middle East, North Africa, and Latin America. The funding will also be used to set up a research and development hub in Thailand which will house the remote software engineers and product developers in a centralised location.
XanPool is one of the leading providers of infrastructure for cross-border payments. The company has built a platform that allows businesses to send and receive payments in multiple currencies. It presently has over 2 million users.
This cash injection comes on the back of solid growth for the company, founded in 2019 by Jeffrey Liu who was named in the Forbes 30 Under 30 Asia list this year. The firm rode the pandemic era digital commerce boom to connect merchants via the Xanpool platform, as opposed to intermediaries like Visa and Mastercard. Liu says the company’s revenue will likely increase more than threefold this year, and is on course to exceed US$163 million in 2023.
Hex Trust is a fully licensed, insured digital asset custodian, providing custody, financing, decentralised finance (DeFi), and brokerage solutions not just for digital asset organisations but for financial institutions, corporations, and private clientele.
With a stated vision to secure the ‘permissionless’ future that blockchain technology can empower, Hex Trust is on a mission to provide the most trusted infrastructure in the digital asset economy. Even as the cryptocurrency markets experience adverse tailwinds, Hex Trust has established itself as a fully licensed framework in key strategic locations like Hong Kong and Singapore, complying with the strictest KYC/AML and global regulatory standards so that it can provision core infrastructure backed up by bank-grade technology.
Hex Trust has grown rapidly and over the course of the previous year added numerous high-profile clients to its stable of over 200 clients including Terraform Labs, Tezos Foundation, Animoca Brands, Huobi Asset Management, UnionBank of the Philippines, and Ripple Labs alongside a host of well-known financial institutions – supporting more than 250 coins and tokens in the process.
Not only is Hex Trust well trusted for its wide assortment of digital assets, stringent focus on market-leading tech and security-first, institutional-grade approach to scalability for high transaction volumes, it is also well-funded. Last year it closed its Series B funding round of US$88 million co-led by Animoca Brands and Liberty City Ventures, and featuring a who’s who of Web3 startups and participants including Ripple, Terra, Morgan Creek, Primavera Venture Partners, LeadBlock Partners, BlockFi, CoinList, Protocol Labs, Pulsar Trading, and many others.
The new funding is being used to scale Hex’s licensed custody services to Europe and the Middle East (the firm opened its office in Dubai and obtained regulatory approval to launch operations there as its base in Middle East and North Africa), obtain additional licenses, continue development and innovation, and expand into new business services like financing and structured solutions.
Hong Kong-based virtual insurer OneDegree announced a deal with reinsurer Munich Re last year to offer a new digital asset insurance product that targets digital asset trading platforms, custodians, asset managers and technology providers — making it one of the first fintech startups in Hong Kong to provide coverage for cryptocurrencies and other digital assets.
In fact, since November 2021 OneDegree is one of four licensed digital asset insurers in Hong Kong and the first insurtech in Asia to bring protection for digital assets (offering coverage to the Hong Kong Digital Asset Exchange to the tune of around HK$12.7 million) with its OneInfinity digital insurance product.
Given the intensity and frequency of cyberattacks on the cryptocurrency ecosystem, OneDegree recognised early the importance of implementing risk management solutions for digital assets, bolstering investor confidence amid a deflating market and supporting the development of other Web3 assets.
OneDegree Hong Kong is actively developing further solutions to provide comprehensive protection to digital asset participants, and is presently studying the conditions to insure decentralised finance (DeFi) projects as well as potentially becoming the first in Asia to insure NFTs.
HashKey Digital Asset Group Limited is unique among fintech startups in Hong Kong, researching and pulling out innovative, community-focused applications to the marketplace. With presences in Hong Kong, Tokyo and Singapore as well as a broad partner-investor ecosystem, the HashKey Group has its virtual hands in a number of pies, offering end-to-end financial services and investment opportunities for startups, including in the Web3 space.
Amongst other things, the Group most recently launched EPotter, an institutional-grade proof-of-stake liquid validation solution, the first of its kind in Asia. This solution comes on the back of its HashKey Pro digital asset trading platform which also services traditional financial institutions, and HashKey Capital, which is a crypto token fund that has backed several notable blockchain startups such as Terra and Blockfolio.
The company continues to draw attention with its partnership with the Crypto-FinTech Lab of HKUST. The university announced that it would have a digital twin campus in the metaverse called MetaHKUST, which will leverage cryptographic and blockchain-based tech offered by HashKey DID, mainly for privacy security and trustless identity management purposes.
Reap is a digital payment company based in Hong Kong that has netted US$40 million in a funding round aimed at developing infrastructure to help facilitate payments between Web3 projects, other startups, and traditional businesses. The funding round was led by Acorn Pacific Ventures, Arcadia Funds, and our previous entry HashKey Capital.
Reap was founded in 2018 by Daren Guo and Kevin Kang, who have payments backgrounds. With a mission to make it easy for anyone to accept or make payments in any currency, the company developed a platform that allows users to make or receive payments in traditional fiat currencies and digital assets. The platform is designed to be simple and easy to use, offering several features that make it convenient for users, including a new corporate credit card with Visa where businesses can manage corporate expenses online.
Blockchain and crypto customers can also repay their credit card balances with stablecoins on the Reap platform, along with other services including expense management and digital payments. Reap will use the latest infusion to fund regional hubs throughout Asia, North American and Europe and to double its team by end-2022.
The company is also working with other crypto startups to build Web3 on-ramps that will allow them to connect with physical merchants and services, targeting a January 2023 launch window.