Hong Kong Fintech Week - Day 1 Highlights - Fireside chat

“Crypto is going in the right direction.”

Fireside chat with Crypto.com CEO Kris Marszalek

Moderated by Henri Arslanian, Co-founder & Managing Partner, Nine Blocks Capital Management

Henri Arslanian, the Co-founder & Managing Partner of Nine Blocks Capital Management, dived right into his fireside chat with Crypto.com CEO Kris Marszalek with the trillion dollar question. After a remarkable year for the entire crypto tech ecosystem, what’s your view on the market today?

“It’s going in the right direction. We've had what was a necessary clean up. A few players who were not supposed to be in place are now gone. And the builders are busy rebuilding the trust in the industry,” said Marszalek.

His message for people working in the broader Hong Kong business and financial services community was straight forward. “I think there's probably never been a better time to join the cryptocurrency revolution than right now. Looking at what's happening in this space, the best way you can use your skill set is to help take the market to the next level,” he said.

Quizzed on what’s in store for crypto between now and 2030, Marszalek admitted that forecasting is almost impossible. However, he recognised that the convergence of A.I. and crypto is inevitable. “This is a completely new world where it's hard to tell what is real, what is not. So blockchain is a perfect technology to help us navigate this new uncertainty. It's incredibly interesting and it's evolving so quickly.”

FinTech Innovation

Embracing Innovation, Regulation and the Future of Finance

Fireside chat with Julia Leung, Chief Executive Officer, Securities and Futures Commission of Hong Kong

Moderated by: Christopher Woolard CBE, Partner, Ernst & Young

Chris Woolard from Ernst & Young distilled his session with Securities and Futures Commission of Hong Kong CEO Julia Leung down to the two most talked about topics – tokenisation and AI.

“Three years ago, the concern was that ELT would actually dominate and upend the entire industry. The view now is more realistic. This is not going to be revolutionary, just evolutionary, as the Web3 ecosystem needs time to build out, but it is definitely coming,” Leung said.

Tokenisation of a fund or bond doesn't change its nature – it’s a security and will be regulated as such. However, as a regulator, Leung sees potential benefits of tokenisation, such as increasing efficiency throughout the product lifecycle and lowering costs.

“While we are supportive of the industry, experimenting, making more of these use cases, we also see new risks associated with it. Later today, we'll be issuing two circulars; one identifying the risks and what regulators expect from intermediaries when doing their due diligence, and another covering additional safeguards on issuing authorised funds and public funds,” she said.

Addressing the interest around A.I., Leung was candid about the SFC’s view. The commission has successfully used machine learning and AI in surveillance for years, and is now assessing the potential of generative A.I.

“We are considering the use cases very carefully, such as whether they create hallucination risks, when they give you a very convincing response to questions, but are sometimes obviously wrong,” she said.

Since you can’t arrest an A.I., a firm’s Senior Manager remains responsible. “We think it’s time to remind our licenced corporations about their risk management obligations, especially in high risk cases, to consider whether humans should be included in the loop,” she said.

A dialogue with the Financial Conduct Authority UK

Nikhil Rathi, Chief Executive, Financial Conduct Authority, United Kingdom

Moderated by Neil Tan, Chairman, FinTech Association HK

As the CEO of the UK regulator for market integrity and competition, Financial Conduct Authority CEO Nikhil Rathi supervises around 50,000 firms. He also oversees the world’s largest market for derivatives foreign exchange. One of his biggest challenges is trying to work out where to devote the FCA’s resources?

“We said recently we're going to focus with our asset management sector on fund tokenisation, and launched a discussion paper with the wealth management asset management industry. tokenisation came up as number one in terms of technology developments,” he said.

The FCA is also in the process of evolving its regulatory framework for crypto assets. A couple of years ago it began registering crypto asset platforms for anti money laundering purposes. “That's been a challenging experience. We implemented a travel rule in the UK, which allows the beneficiary and sender information to be shared for crypto assets, and we want to see that implemented globally,” he said.

Rathi says one should never underestimate how small reductions in friction in the payments world can drive very significant changes in consumer behaviour. In the UK, over 37% of payments are now contactless.

“This question of how consumers wish to pay for services or store their deposits could move very quickly. For example, in some jurisdictions, when banking turbulence and the prevalence of social media has made deposits much, much less sticky. So money could start moving much faster than has been the case historically. That's important from a consumer protection perspective, and important from a perspective of how the deposit protection system works,” he explained.