Interview with new COO Livio of HashKey Group: The new pattern of "rising east and falling west" has become a trend, and licensed trading platform is the main theme in the next 10 years

An interview with Livio, HashKey Group's new COO: The new pattern of "rising east and falling west" has become a trend, and licensed trading platform is the theme of the next 10 years.

Original source: PANews

Livio Weng, also known as "Lord Seven", was CEO of Huobi Global from 2018 to 2021. In the glory years of the three schools, it is a banner of the old Huobi. On April 13, HashKey Group officially announced that Livio Weng has officially joined the company as Chief Operating Officer (COO).

During Web3 Carnival in Hong Kong, PANews conducted an exclusive interview with Livio Weng, discussing the policy dividend in Hong Kong, the global crypto market pattern, the explosion of Bank of America and ETH Shanghai upgrade and other hot spots. And reveals what's next for HashKeyGroup's compliant trading platform HashKeyPro. At present, HashKey's licensed trading platform products have been basically ready and are in the final gray test stage. At present, professional investors (PI) have opened the early registration and product testing, can support the deposit and withdrawal of virtual assets, and launched the US dollar fiat currency trading pair. It is expected that the legal currency channel will be put online this month to provide support for US dollar inflows and outflows.

The following is the transcript of the interview (with minor adjustments without changing the original intent) :

1. The Web3 Summit in Hong Kong is quite lively. As one of the organizers, could you please introduce the event?

Livio Weng: It is a great honor for HashKey to be one of the organizers presenting the Hong Kong Web3 Carnival for industry organizations. The conference had the honor of inviting key officials, including Mr. Paul Chan, Financial Secretary of Hong Kong, and Clara Chan, Chief Executive Officer of the Hong Kong Monetary Authority. It also attracted more than 10,000 participants from different countries and regions, and more than 140 peripheral events, large and small, which exceeded previous expectations.

On the eve of the conference, the Hong Kong Web3.0 Association was established, and the Chief Executive's support has added more expectations to the Hong Kong Web3 industry. In addition, the summit also coincides with the upgrade of ETH in Shanghai, which happens to combine the three elements of the right time, geographical location and people.

As the first large-scale industry activity after the spring of 2023, many friends hope to take this opportunity to reunite offline, it is expected that there will be a lot of new stories in Hong Kong this hot land. The conference is a fulcrum, accompanied by a rapid influx of practitioners to Hong Kong, further promoting Hong Kong as the Web3 hub of Asia.

2. How do you view Hong Kong's Web3 industrial policy?

Livio Weng: As one of the world's financial centers, Hong Kong has been very positive about the development of the blockchain circuit, resulting in the birth of a number of leading Web3 companies and brands in Hong Kong. In October last year, Hong Kong issued the Policy Declaration on the Development of Virtual Assets in Hong Kong, which further clarified the government's recognition and supportive attitude towards Web3-related industries. Hong Kong Securities and Futures Commission Chief Executive Leung Feng-yee also made it clear not long ago that the virtual asset platform is a part of the Web3.0 ecosystem and supports the development of related ecosystems. The launch of the license system of virtual asset trading platform provides legitimacy guarantee for the virtual currency trading platform operating in compliance, and promotes the industry to enter a period of strategic opportunities.

1) The new pattern of "rising east and falling west" has become a trend

Globally, due to the accumulation of a large number of risks and contradictions in the long-term bear market, the regulatory attitude towards the Web3 industry has been differentiated in various countries for a period of time. Among them, western countries represented by the United States began to take strict and conservative regulatory measures on Web3 industry.

The Hong Kong government, by contrast, has taken a further and deeper view of the Web3 industry. For example, Director General Chen Maobo said that in the past period of time, the virtual asset market fluctuated greatly, and even the virtual asset trading platform closed down, which made some people doubt the prospect of Web3, but this is the best time to promote the development of Web3. Under this distinct new rhythm, industry resources and talents are rapidly converging to the east. Hong Kong has become the new growth pole of the global Web3 industry, forming a trend of "rising east and falling west".

The more fundamental reason behind the "rising east and falling west" lies in the chaos of global capital markets brought about by the tide of dollars. An important driver of the last bull market was excessively loose monetary policy during the pandemic, with spillover liquidity rapidly driving up the prices of risky assets such as virtual assets. And regulatory indulgence allowed some European and American institutions to use high leverage to magnify returns at bull market highs despite risks. Then the Federal Reserve quickly and violently raised interest rates and shrank the balance sheet, resulting in a sudden contraction of liquidity in the market. These institutions formed a book deficit. In order to fill the hole, they adopted risky behaviors such as attracting deposits with high interest rates, embezzling customer funds, manipulating market prices, and so on. The resulting industry concerns about agency risk, or "FUDs" of all kinds, have intensified. In particular, the compliance of virtual currency trading platform has become an important topic in the industry.

2) The compliance trading platform will become the main melody of the industry development in the next decade

Trading platform is one of the core links of Web3 industry, and it is also the most vulnerable business to regulatory attention. In the past few years, due to the lack of unified and effective regulatory standards and mechanisms, virtual asset trading platforms have faced many problems and risks, such as fraud, money laundering, hacker attacks, user funds security and so on. These problems not only harm the interests of investors, but also hinder the healthy development of Web3 industry.

Therefore, it is necessary and urgent to establish a regulatory framework for a compliant, safe and trusted trading platform. Hong Kong's Securities and Futures Commission has already taken an important step in this direction with its virtual asset trading platform licence. The new licensing system, which will take effect in June, is attracting global attention.

The value of the compliant trading platform lies in the safer custody of assets and the more convenient access to money, which will keep all kinds of "FUDs" in the industry neutral and allow digital currency holders to "sleep".

With the implementation of the Hong Kong licensed trading platform and the clarity of the regulatory framework, a number of countries and regions around the world are expected to follow suit and adopt similar policies. The compliance trading platform will develop into the mainstream of the market and become the first choice of more institutions and investors.

3) Hong Kong will become a breeding ground for the Eastern crypto industry with its unique advantages

In addition to its leading and comprehensive compliance policy advantages and strategic position as a global financial center, Hong Kong will also attract enterprises from the whole Greater East Asia ecosystem to settle in by virtue of its unique geographical advantages and open talent policy. After this summit, it is expected that a number of Web3 enterprises will set up shop in Hong Kong, and incubate the greater future of the Web3 world.

3. The recent upgrade of ETH in Shanghai has been a hot topic. What are the short-term and long-term impacts of this upgrade on ETH?

Staking. This upgrade is all about allowing the pledgee to staking their ETH and staking proceeds. After implementing the Ethereum merger last September, ETH is officially transitioning from POW to POS, but not yet getting back the Staking benefits. After the Shanghai upgrade, the pledge can be stable and expected to get back income. If BTC is Staking, then ETH Staking is somewhere else. Then we will have "digital staking" on the chain.

In the short term, after the smooth completion of the Shanghai upgrade of Ethereum, a large number of unlocked ETH will form selling pressure on the market, which may lead to negative, but the impact is limited.

In the long run, the Shanghai upgrade of ETH will improve the security, efficiency and scalability of ETH, laying a solid foundation for the future development of ETH public chain. The most important point is that the upgraded ETH will realize the recovery of the pledge income, which will form a positive cycle and encourage more capital to buy ETH for pledge, thus pushing up the pledge rate of ETH (around 40% as compared with other public chains), reducing the actual circulation, and thus creating a long-term positive for the currency price.

4. What development will ETH Shanghai have to look forward to after the upgrade?

Livio Weng: After the Shanghai upgrade, we pay more attention to the sharding technology (DankSharding) proposed by EIP-4844. The sharding implementation is expected to push the performance of ETH to 100,000 TPS level, which will push the Web3 industry into a real application implementation cycle.

Since the outbreak in 2017, the development of the public chain is still in the early stage, showing the characteristics of aeration and bubbling, and the essence is the "unavailability" of the chain. Due to the limited throughput and capacity expansion capability of ETH, network congestion and high fees are incurred, which seriously affects user experience and developer innovation. Compared to traditional web2 applications, the speed and stability are far from comparable.

After the ETH fragmentation, the blockchain becomes "usable". Sharding is one of the core technologies of ETH 2.0, which will split the ETH network into multiple shards running in parallel, each of which has its own state and transaction. Sharding is expected to bring more scalability and storage capacity to Ethereum, making the ethereum blockchain faster and more scalable. At the same time, sharding is expected to lower transaction costs for Layer-2 technology solutions while maintaining the advantage of using Ethereum blockchain security. In this way, the throughput and capacity expansion of the ETH can be greatly improved.

Before Ethereum's performance reached market demand, various other public chains essentially took over the performance requirements of Ethereum's ecosystem. After ETH 2.0 completes a series of technological upgrades, it is expected that in the long run, there will be no more public links, users, assets, data, services, information islands and value barriers, which will stimulate more innovation and collaboration. DApps will see a real boom in the Web3 ecosystem of application scenarios and value creation implementations.

It can be said that the implementation of ETH fragmentation will be close to the important role of broadband to the Internet and iPhone to the mobile Internet in history, which marks the real maturity of blockchain infrastructure layer and has epoch-making significance.

5. What is the impact of external environment changes such as the Bank of the United States explosion on virtual assets?

Livio Weng: One of the most striking trends in the current global macro environment is the accelerating breakdown of the western fiat currency order represented by the US dollar. In this context, virtual assets, as a kind of decentralized digital assets, are showing their unique comparative advantages.

The "great tide" of the dollar in the past few years directly contributed to the current worldwide bank liquidity crisis, and does not rule out further triggering a new round of global financial crisis. This has led to a crisis of trust in legal currency led by the US dollar, which indirectly promotes some early adopters to accelerate their embrace of virtual assets. Due to the original and transparent supply and issuance mechanism of virtual assets, they can hedge against monetary policy changes and inflation erosion, and have stronger anti-risk ability.

From the perspective of Web3, the essence of the collapse of trust in the dollar is that it adopts the single currency pledge unlimited issuance mode.

As the world's main reserve currency and settlement currency, the unlimited issuance of the US dollar has led to the imbalance of the global financial system and buried hidden dangers for the financial market. In the past few decades of western economic prosperity and prolonged quantitative easing, the hidden risks of this model did not show up. Once the economy fell into recession, the risks surfaced, with America's debt spiralling out of control, Credit Suisse exploding and parts of the West breaking the pretence of the sanctity of private property. To some extent, the single currency pledge unlimited issuance mode has come to its bottleneck.

What many people forget is that bitcoin was born against the backdrop of the collapse of Lehman Brothers. In the last financial crisis in 2008, Lehman Brothers declared bankruptcy, triggering a worldwide credit crunch, asset depreciation, market panic and other problems. It was against this background that Bitcoin was born. Bitcoin is the first successful virtual asset, which is built on a decentralized consensus mechanism and has the characteristics of security, transparency and traceability. The emergence of virtual assets is not only a challenge to the traditional financial system, but also a self-protection mechanism for people to deal with financial crisis.

Today, safe haven assets such as gold continue to rally because of changes in the external environment, such as bank thunderstorms. Comparatively speaking, digital assets such as bitcoin and Ethereum have greater selection advantages in liquidity, storage cost, transaction efficiency and other aspects. They are digital, programmable, divisible and easy to transfer. Virtual assets are gradually becoming one of the mainstream hedge assets.

6, the current market has come out of the deep bear? Before the industry continuous industry thunder, will affect the future approach of new capital?

Livio Weng: Although major currencies such as BTC and ETH have rebounded this year, the overall trading volume and market value still cannot match the bull market, and volatility and uncertainty in the market remain high. Prior to the industry's successive thunderstorms, also brought a huge blow to the market, affecting investor confidence and the entry of new players.

But in essence, successive industry booms prove the value of decentralization:

1) The essence of continuous mine explosions is the evil of decentralization, not the denial of decentralization. The explosion comes from the lost institutional agents added various forms of leverage at the high level of the bull market, and finally formed a serial stampede in the market bear.

2) The decentralized applications represented by Uniswap, Compund and other DeFi, with better on-chain transparency, avoid the problems caused by human manipulation and prove the value of the decentralized model.

Therefore, I believe that after the original source, the industry will usher in greater development.

As for whether to go out of the deep bear, there is still a big variable. The factors affecting the market in the short term are as follows:

1)Fed rate hike toward the end, when the rate cut cycle.In the short term, another interest rate hike is expected within the year. Although the interest rate hike expectation has been greatly reduced, the interest rate has already run to the high range, which has a huge impact on the endangered US bond market. At the same time, the Fed continued to shrink the balance sheet will greatly test the global liquidity, the negative is not reduced. But at the same time, the risk aversion of capital and risk aversion demand and positive BTC, the recent rebound is according to this narrative.

2)Is there a bigger bank explosion that could trigger a global financial crisis?The banking crisis will also greatly test global liquidity in the short term, which may result in a stampede similar to the "312 event" in 2020. If such a situation occurs, then the digital currency market will also face enormous pressure and challenges, there may be a large drop and panic.

3)After ETH Shanghai upgrade, due to the on-chain unlocking assets to retrieve the pledge income, it may form a period of selling pressure.After the market digested the selling pressure, the ETH pledge rate is expected to rise rapidly from about 15% to nearly 40%, and the market is also getting warm. The ETH Shanghai upgrade is an important milestone in the ETH 2.0 roadmap, bringing enhanced security, scalability and efficiency to the ETH.

On the whole, this round of crypto bear market is not completely over, the short-term market has not completely come out from the previous industry serial thunder negative, a lot of capital is still afraid of the tiger, disk trading funds and trading intentions are still in a tense state, we need to closely observe the momentum and sustainability of this round of rebound since this year.

What is certain, however, is that in 2024 to 2025, the industry will enter the next explosive cycle as BTC halves, the US dollar enters the cycle of interest rate cuts, technologies such as ETH sharding promote the iteration of infrastructure efficiency, and the widespread popularization of compliance trading platforms. Virtual assets will see wider adoption and acceptance, and the market will be healthier and more active.

During the bear market of the past two years, the truly strong and valuable projects in the Web3 industry were saved. After the tide of speculation fades, the remaining strong participants will focus more on technological innovation, practical application and value creation, and contribute to improving the quality of the real economy, which is the history of the Internet technology industry.

7. HashKey previously announced that it had obtained the virtual currency trading platform license in Hong Kong. Can you disclose the current business progress?

Livio Weng: Currently, HashKey's licensed trading platform products are almost ready and in the final phase of grayscale testing. At present, professional investors (PI) have opened the early registration and product testing, can support the deposit and withdrawal of virtual assets, and launched the US dollar fiat currency trading pair. It is expected that the legal currency channel will be put online this month to provide support for US dollar inflows and outflows.

As a licensed virtual asset trading platform in Hong Kong, HashKey PRO complies with Hong Kong Securities and Futures Commission regulations and is currently limited to professional investors. The Hong Kong Government currently has plans to open up virtual assets to retail users. We are working closely with the regulatory authorities to ensure that all necessary regulatory requirements are met and the products are launched as soon as possible to provide safe and reliable trading services for retail users.

8. You have been a leader in the trading platform circuit for a long time. What is the opportunity to join Hashkey this time? What are the differences between a licensed trading platform and a traditional trading platform?

Livio Weng: The regulatory compliance of Bitcoin and other cryptocurrencies is an inevitable part of the history of this new thing. Most of the trading categories in the world, including gold, silver, stocks and bonds in history, originated from folk behaviors and experienced a long time of natural evolution, accompanied by the occurrence of various risks. Finally, under the guidance of the government, market behaviors were regulated and unified large market or license regulatory system was established.

For example, banks developed from the historical norms of bill numbers and banks. In the Ming and Qing dynasties, savings were attracted by the personal credit of organizations or entrepreneurs, but the credit of private enterprises could not support the economic cycle or various kinds of bank runs caused by accidents, and ultimately left a lot of risks to the society. With the government-led regulation and order, the establishment of various management mechanisms and safeguard measures, the banking industry gradually entered the public, towards prosperity.

Virtual currency is no exception, after more than a decade of development, has come to the stage of no choice. Early trading platforms on the market rely on the credibility and integrity of operators, but from the past two years of serial thunderstorms in the industry, such a model also contains huge risks, standardization, legalization is imperative.

Personally, I choose to join the big ecology of Hong Kong licensing business because I see this historical inevitability and firmly believe in the future development opportunities of Hong Kong in Web3.

Licensed trading platforms represent the future and will be the dominant theme for the next five to 10 years

With the tightening of the global regulatory environment, more and more countries and regions will issue regulations and requirements on virtual asset trading in the future. Trading platforms without licenses or non-compliance will face great operating pressure, or even be banned or closed down. In the past, the legitimacy of virtual assets has been questioned, discouraging new players from entering the market. After the HashKey Group applied for the license, many traditional organizations quickly contacted us and wanted to work together. The demand and willingness was overwhelming. As regulatory frameworks for virtual assets are rapidly becoming clearer around the world, licensed trading platforms will become a requirement for compliance, not an option. This moment is likely to be a historic turning point for the development of the blockchain industry as a whole.

Licensed trading platforms have long application cycles, high operating costs and limited asset types, but these constraints also bring business barriers:

1) Provide convenient and safe legal currency access. Licensed trading platforms can properly cooperate with banks and other financial institutions to provide legal and convenient legal currency channels, so that users can facilitate the two-way exchange of local currency and virtual assets. Compared with the current centralized trading platform, most of them still use P2P over-the-counter trading with greater risks, which greatly improves the security. In every bull market, access to the gold channel is often a battleground among trading platforms.

2) Safe asset custody capability. According to regulatory requirements, licensed trading platforms are required to adopt professional risk control systems and security measures to ensure the safe storage and transfer of user assets. At the same time, licensed trading platforms also need to undergo regular reviews and spot checks by regulators to ensure that their operations meet standards. In addition, licensed trading platforms need to provide users with insurance or compensation mechanisms to deal with the possibility of accidents or hacking attacks.

3) Business sustainability. Under the development trend of license system gradually becoming the mainstream, all countries will continue to complete the compliance transformation of virtual currency trading platforms, and non-licensed trading platforms will continue to be squeezed by policies, and even face criminal risks. Operational sustainability will also be a long-term competitiveness of the compliant trading platform.

The compliance market in the United States spawned Coinbase, which was once worth more than $60 billion. In the Eastern market of the same size, we believe the market has the same potential. Especially in the next round of bull market, with the rising price of virtual assets, the compliance trading platform will usher in greater value.

9、在以太坊性能扩容后，去中心化交易平台（DEX）的体验也将提升，未来 DEX 会不会全面替代中心化交易平台，包括合规交易 平台 ？

Livio Weng: DEX and CEX are both important components of the virtual asset trading ecosystem, with different strengths and weaknesses.

DEX has the advantages of decentralization, security, transparency, and no trust. It is more suitable for advanced users with wallet operation ability.

The advantages of CEX are:

1) Lower industry entry threshold (no need to open on-chain wallet and manage private key)

2) Reliable fiat money into the gold channel (DEX cannot open an account in the bank)

3) One-stop banking services (derivatives, Staking, staking, staking, staking, staking, etc.)

For a long time, DEX and CEX will coexist, not replace each other. CEX still dominates in terms of overall transaction volume and user size.

10. In addition to the trading platform, what other layouts will HashKey Group have?

Livio Weng: HashKey Group has a complete business ecosystem, including digital asset trading, custody business, brokerage business, venture capital, asset management, node verification, as well as DID, NFT, GameFi and other Web3 infrastructure services one-stop solution, complete CeFi and DeFi strategic planning, Covers the major areas of virtual assets.

In terms of trading platform business, HashKey Group is the first digital asset group in the world to have received virtual asset licences (including OTC licences) from the Hong Kong Securities and Futures Commission and the Financial Services Agency of Japan, as well as an exemption licence under the Payment Services Act from the Monetary Authority of Singapore. Digital Payment Token (DPT) services including OTC services can be provided within a specified period.

At the same time, HashKey Capital is one of the most influential and largest crypto funds in the world, as well as the earliest institutional investor of Ethereum. Since its establishment, the asset management scale has exceeded $1 billion. Up to now, Hashkey Capital has invested in more than 500 projects from infrastructure, tools, applications and other tracks.

HashQuark, owned by the HashKey Group, is the leading Staking service provider, ranking in the top ten globally and top three in Asia. Staking a Staking staking staking staking is an staking staking staking staking on a safe, zero-failure staking staking customer for 5 + years. Most of the major staking companies, including Ethereum and Cosmos, are staking their claim with Classic Staking and Liquid Staking.

The HashKey Group has also just released the Eco-Points HSK to motivate and empower the various businesses of the HashKey ecosystem. Unlike the traditional concept of the dollar, HSK does not conduct public sales aimed at raising funds. Instead, HSK rewards early adopters and core contributors of the HashKey PRO trading platform and other eco-businesses, including attendees of the Web3 Carnival.

HashKey Group will continue to invest more resources and enthusiasm, along with Hong Kong's Web3 strategy, to contribute to the development momentum of the industry.

This is an era full of changes. Hong Kong is expected to release strong policy dividends in the changing global pattern of "rising east and falling west", and become the highland of the global Web3 industry. We will vigorously promote the development and growth of licensed business, especially the compliance trading platform, and become a haven for people to protect their assets and obtain the development dividends of the Web3 industry in the complex global macro financial environment.

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