Exclusive interview with cryptocurrency exchange partner Hong Kong’s policies are uncertain, so I choose to start a business in South America.
Exclusive interview with crypto exchange partner Uncertain policies in Hong Kong, starting a business in South America.
Author: Meta Era
In this exclusive interview with Meta Era, we are honored to invite 0xpineapple, a senior practitioner in the Hong Kong cryptocurrency exchange industry, to share his insights on the unique exchange ecosystem in Hong Kong.
During the interview, 0xpineapple expressed his concerns about the cryptocurrency policies in Hong Kong. Due to the ambiguity of the policies, he believes that this brings high risks and uncertainties to the entrepreneurial process. In view of this, he made an important decision to give up further development in the Hong Kong market and turn to seek new opportunities in South America, the Philippines, and other regions.
Currently, his company onoffdex.com is focusing on developing online payment platforms in South America and the Philippines, and he is confident in the potential of these markets. These regions have the advantages of dense population and a large number of young people, combined with strong government support for cryptocurrencies, making them very attractive blue ocean markets for entrepreneurs. In this interview, 0xpineapple particularly emphasized the clarity of regulations and the positive attitude towards cryptocurrency development in South America and the Philippines, which gives entrepreneurs more confidence in investing here.
In contrast, he holds a cautious attitude towards the domestic market, believing that there may be greater risks in cryptocurrency-related operations in the absence of clear policies. Therefore, he decisively turned to South America and the Philippines, believing that these regions have greater development potential and provide a good investment environment for entrepreneurs.
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Below is the full interview:
Meta Era: You used to operate a cryptocurrency exchange shop in Hong Kong and have been expanding your business with partners, but eventually chose to give up your career in Hong Kong. What prompted you to make this decision?
0xpineapple: Personally, I believe that there are still some uncertain boundaries in the cryptocurrency laws and regulations in Hong Kong. Two years ago, relevant government agencies stated that only corporate clients and high net worth individuals could invest, but now retail investors are also allowed. I have been involved in the fintech industry in Hong Kong before and understand that it takes a long time for policies to be proposed and implemented. In this process, if you want to carry out projects, you have to go through a period of ambiguity.
But I dislike working in an unclear environment. I like to invest and go all out in legal and compliant industries. If the policies are not clear or not clear enough, it is difficult for entrepreneurs like us, and we don’t have much capital to obtain expensive licenses like the HashKey exchange. If we all invest in a vague market, it actually incurs high time costs, making it difficult for me to expand my business further.
Meta Era: There is still a lot of room for growth in the Hong Kong market, and in the future, Hong Kong is expected to become a very strong competitor and crypto center in mainland China and even the whole of Asia. Everyone’s views on this issue may be different. So when did you leave the Hong Kong business?
0xpineapple: I left Hong Kong over a year ago. My judgment on Hong Kong is that people from mainland China come to Hong Kong to buy cryptocurrency, as if Hong Kong is a large exchange shop. Even though some bosses who have obtained the Money Service Operator (MSO) license issued by the Hong Kong Customs and Excise Department, in my opinion, the risk is still very high. Some of the bosses who have obtained the MSO license even have the problem of not being able to return to mainland China, because this behavior itself is not within the scope of laws and regulations in mainland China. And I believe that in the future, cryptocurrency will not be completely legalized in mainland China, so I will not venture into this field.
In the Philippines, all my partners are licensed, and I am also applying for a license in Brazil. The market size in the Philippines and South America is definitely larger than the current size in Hong Kong, and all business activities can be conducted in compliance. In South America, the current competition is relatively less intense, so the time and cost of investment in this area will be relatively lower for me.
(Image source: Gadgets 360)
Meta Era: The past year can be said to be the hottest year for the entire Web 3.0 and cryptocurrency field in Hong Kong. With the launch of the virtual asset trading platform licensing regime, many Web 3.0 entrepreneurs have flocked to Hong Kong. However, as one of the very few who chose to give up Hong Kong business and develop in South America, could you share your thoughts and experiences in detail?
0xpineapple: I have helped to apply for some SFC businesses before, such as the SFC savings recharge financial license, which requires approval from the Hong Kong Securities and Futures Commission. When clients come to me for business cooperation, I need to submit reports to the Hong Kong Securities and Futures Commission for review, but it takes at least half a year or more to complete the process. However, in doing business, clients cannot wait for half a year. The crypto field changes rapidly, and when your business needs to wait for half a year, many clients may be lost.
Sometimes I believe that policies exist, but whether they can be implemented and whether they can provide convenience and help for entrepreneurs like us is another matter. Founders like us don’t have much capital, no investors, and not so much capital to wait for such a long time. Most of the time, we have to make good use of time to make money, rather than spend time communicating with the Securities and Futures Commission or other organizations. We want to find a market where ideas can be implemented tomorrow.
Meta Era: So you think the current regulatory policies are still too vague, and you choose to give up on Hong Kong and develop your business elsewhere because the business plans in those places are clearer and more stable, attracting more interests, right?
0xpineapple: Yes, and the regulatory policies in Hong Kong do not have a clear timetable. All applications and approvals do not have specific timeframes. It would be much better if they could tell us that after I submit the application, the review will begin the next day, and a response will be given within ten days, or confirmation will be made within a month.
So we must be clear about what needs to be done at each time point, know what I am doing today and what I will do next month, and all time schedules must be clear. But Hong Kong’s policies do not provide this information. I am not a blind follower. I have been to many different places, encountered different policies, and met different people. Therefore, I do not simply follow the news or the sudden trends. I prefer personal exploration and independent thinking.
Meta Era: The policies in Hong Kong were just introduced in June, and it takes time for the implementation and enforcement of the whole policy. So do you think you will return to the cryptocurrency ecosystem in Hong Kong in the future, or will you continue to develop elsewhere?
0xpineapple: My judgment is that, because I am currently a founder with limited funds, I choose some places with lower costs so that I can quickly recoup my funds and start making profits gradually. I often feel that Hong Kong is more suitable for financial investment and capitalists, rather than grassroots founders like me. It is unrealistic for me to wait in Hong Kong to compete for licenses with others. But if my businesses in South America and the Philippines are running well and I can obtain a sufficiently large scale of funds, so that I can bid or wait for the approval of licenses, then I may consider returning to Hong Kong. But this is a phased consideration, definitely not at the current stage, but when my businesses elsewhere are very stable and have a sufficiently large scale of funds.
Meta Era: From a long-term perspective, do you think Hong Kong is advantageous for you?
0xpineapple: I think Hong Kong is advantageous, especially for larger companies.
Because Hong Kong issues licenses itself, which has both advantages and disadvantages. The advantage is that it can filter out some projects that harm investors. A serious problem that existed in the cryptocurrency industry before was that it was easy to issue coins and do projects. As long as you find someone who understands code and marketing, any random idea could raise funds. I have personally experienced this stage, so the advantage of issuing licenses is to raise the threshold and allow capable entrepreneurs to enhance the reputation of this industry, which is very good.
But the downside, as I just mentioned, is that this is not a good scenario for grassroots founders like us. We currently do not have enough time and funds to wait for licenses or compete with large companies.
We are aware of our shortcomings, so we are currently engaging in deep cooperation with financially strong or soon-to-be licensed companies. We may not be able to go through the lengthy process ourselves, but we have already communicated with some powerful institutions in advance. They are responsible for compliance in Hong Kong, while we are responsible for product development and promotion. I think this model may be better.
As you can see, licenses are not issued on a large scale, but rather on a case-by-case basis. We need to find our own way to implement in Hong Kong, and then selectively cooperate with some large institutions. This approach is conducive to reducing initial investment costs and at the same time allows us to not completely give up on pursuing our own projects.
However, in the long run, the system in Hong Kong may not be able to change. For us, Hong Kong is actually a relatively difficult place. First of all, our opportunity cost is very high, and the cost of living and prices in Hong Kong, including labor costs, are very high. Therefore, in the long run, large institutions may be more advantageous. If grassroots founders want to establish themselves in Hong Kong, actively cooperating with some large institutions, like me, is also a feasible choice.
(Image source: Vocus)
Meta Era: Some time ago, the Financial Times interviewed the founder of One Satoshi, a foreign exchange store. He mentioned that the transaction volume of mainland tourists in Hong Kong’s exchange stores increased by 20% to 25% in the first five months of this year compared to last year, and he expects an increase of 35% to 40% by the end of the year. Based on the current situation of Hong Kong’s exchange stores, the profitability trend is developing in a positive direction and is expected to further increase.
In the case of gradually improving regulations, do you think these exchange stores will perform well in the future?
0xpineapple: At present, my main business is not OTC (over-the-counter trading), but I want to develop an online payment platform. Regarding the OTC business in Hong Kong, my view is to treat it as a currency exchange store. In the Central and Western districts of Hong Kong, you will see several exchange stores. The rent for these offline exchange stores is not cheap, and they mainly serve crypto enthusiasts entering Hong Kong from the mainland, so these exchange stores have room to survive.
In comparison, the trading volume of Crypto is relatively small. If we compare the scale of exchange stores with OTC, the trading volume of exchange stores may not even be one percent of OTC. The overall OTC market in Hong Kong has not exceeded 100 stores, while there are over 1,000 licensed exchange stores, including some large exchange stores with dozens of branches. The demand for currency exchange itself is a rigid demand, but the number of people using Crypto is still in the early stage, and many people are still using US dollars instead of stablecoins (USDT).
However, over time, more and more people will consider using USDT instead of US Dollar. When using US Dollar, you need to have a bank account, but opening a bank account is a complex and time-consuming process. In contrast, creating a wallet only takes 30 seconds, and the speed of USDT can be confirmed within 1 minute. Therefore, as more and more people realize the advantages of crypto, more people will choose this payment method, which will also lead to more people purchasing crypto through OTC.
Although Hong Kong is still in the early stages of this, I currently do not engage in OTC transactions because of the higher risks. I am not sure if domestic policies will suddenly change, so my approach is to wait and see rather than execute.
Meta Era: It was mentioned earlier that there are many offline exchange shops in Hong Kong in a gray area, and many mainland tourists and residents specifically go to Hong Kong for exchange and purchase of cryptocurrencies. From my understanding, many of these exchange shops do not require KYC (Know Your Customer) and only need very basic identity verification for transactions.
What is your view on this gray industry? Do you think the Hong Kong government will adopt strong regulatory policies in this regard?
0xpineapple: I think regulation is an inevitable trend, whether in Hong Kong or worldwide. However, personally, I prefer to invest time and energy into a more clear and compliant market, which will be more secure and easy.
Because there are many uncertainties in Hong Kong itself, the market may exist, and laws and regulations will gradually be regulated, but currently in a state of ambiguity, which makes me worried. Our profits are already thin, but the risks we may bear are very high. This means that we have to bear the high-risk compliance responsibility. If we do not handle compliance properly, we may inadvertently get involved in money laundering and other issues, so I would rather not get involved in such matters.
Meta Era: How do you think these offline conversion shops will be presented under regulatory policies in the future?
0xpineapple: According to my understanding, the Philippines began issuing virtual currency licenses, known as CSP Licenses, 3 or 4 years ago. The Philippines is progressing faster than Hong Kong. They allow offline conversion of fiat and cryptocurrencies. Their practice is that every customer who wants to trade must undergo comprehensive identity verification. The shop collects customers’ identity information and statements of fund sources. In addition to taking ID cards, they may also scan whether the customer belongs to a high-risk group. After the transaction is completed, the shop needs to compile a report and inform the regulatory agency of the number of transactions completed that day, the identities of these people, and other relevant information. This process is already implemented as a regulatory measure in the Philippines.
The second process is that since they have obtained the KYC information of these individuals, the regulatory agency has the opportunity to conduct tax audits on the cryptocurrency trading activities of these individuals, allowing the government to obtain tax revenue. Such regulatory measures will actively promote compliance, and the regulatory agency may guide you on how to conduct compliant transactions. I think Hong Kong may develop in this direction in the future.
(MoneyBees is the first offline cryptocurrency OTC in the Philippines. Image source: manilastandard)
Meta Era: Specifically, what motivated you to choose South America for development? In your opinion, what are the attractions and opportunities for Web 3.0 entrepreneurs in South America? What are the areas that your companyonoffdex.comis optimistic about?
0xpineapple: The areas we are optimistic about are blue ocean markets, dense population, a large population of young people, and favorable cryptocurrency markets due to banking infrastructure, etc. These are all areas that we are optimistic about.
Meta Era: Do you think there are opportunities for both South America and the Philippines to coexist?
0xpineapple: Yes, because they have large populations. By focusing on these two countries, one with a population of over 100 million and the other with over 200 million, totaling over 300 million, it is several times the population of Hong Kong.
I have not entered the domestic market because I have some concerns. When it comes to money matters, it must be compliant, but there are currently no clear regulations telling you how to operate, so it is still in a gray area. I won’t consider it for now.
But the Philippines and Brazil are both good choices, and many issues can be addressed by consulting lawyers. Moreover, these markets have strong support for cryptocurrencies and are very open. We know clearly that every investment we make is feasible, so we can invest boldly. Because we don’t have external investors, our funds come from ourselves, and we must use every penny wisely. If the policies in the mainland or Hong Kong suddenly change and tell you that you can’t continue to operate tomorrow, and you have just formed a company and a team, it will cause great losses. In the Philippines and Brazil, however, government policies are relatively clear, and they will tell you whether you can continue or not. There will be no problem with the funds we invest because you will know the time node for return on investment, and they will allow you to continue developing. This is the most important factor we consider.
In fact, I have previously invested in Crypto ATMs, and I can be considered one of the early investors. However, last year I sold the ATM machine company to someone else, mainly because I didn’t know enough about Hong Kong’s policies regarding Crypto ATMs and was unsure about people’s attitudes towards them.
However, in Brazil, I will be the first person to own a Crypto ATM.