The once-booming crypto enthusiasm in Hong Kong has cooled significantly over just two months. What was celebrated as a bold new chapter for Web3 and digital assets in early 2025 has evolved into a more selective, high-barrier ecosystem — one where only the most prepared and sophisticated players can thrive.
After a whirlwind of activity in April — highlighted by the Web3 Festival and several concurrent blockchain events at the Hong Kong Convention Center — the city buzzed with global investors, developers, and entrepreneurs. Hotels in Wan Chai, Central, and Causeway Bay were fully booked; even outdated properties like the Island Shangri-La saw room rates double overnight. Pedestrian bridges leading to the convention center, silent for years, teemed with crowds.
At the time, slogans like “Long Hong Kong” and “Long Crypto” echoed through conference halls. High-profile figures once absent from mainland China, such as controversial crypto entrepreneur Justin Sun, made surprise appearances at industry meetups.
But today, many of those early enthusiasts have already moved on.
The Exodus of the "Dreamers"
A growing number of Web3 startups — particularly those focused on DeFi, GameFi, and NFT applications — are leaving Hong Kong. These are often teams with a history of aggressive token launches, market manipulation, and quick profit-taking — what the industry calls “mowing the lawn” or “rugging.”
These groups initially flocked to Hong Kong hoping to exploit regulatory ambiguity or fast-track listings on compliant exchanges. But reality hit hard after June 1 — the official opening date for virtual asset exchange license applications under new Securities and Futures Commission (SFC) rules.
While legacy platforms like OKX and Gate.io rushed to establish local entities before the deadline, new entrants face steep technical and financial hurdles. According to insiders, setting up compliant trading, custody, and security systems can cost upwards of HKD 100 million — just for the application process.
One founder admitted:
“Hiring IT talent here is prohibitively expensive. We’d spend HKD 30,000 monthly per engineer — far more than what we’d pay in Shenzhen for better talent. Our core tech team will stay in mainland China.”
This cost disparity makes Hong Kong impractical for bootstrapped startups aiming to build scalable Web3 infrastructure.
Moreover, there's no guarantee of approval — or profitability — even after massive investment. Some departing teams have relocated to Southeast Asia, where monthly rents for spacious offices in Kuala Lumpur or Manila run as low as CNY 60,000, coupled with access to affordable technical labor.
Even established players are struggling. OSL, a licensed crypto exchange under BC Technology Group, reportedly began seeking buyers after its revenue plummeted from HKD 270 million in 2021 to just HKD 71.48 million in 2022. Despite being one of Hong Kong’s few regulated platforms, it failed to attract a buyer — a sign of shrinking market confidence.
Banking Barriers: Regulation vs. Reality
While regulators have shown strong support for Hong Kong’s digital asset ambitions, practical challenges remain — especially in banking.
Multiple founders told Tencent News Qianwang that despite government encouragement and successful company registration at Cyberport or Science Park, they still cannot open corporate bank accounts.
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The Hong Kong Monetary Authority (HKMA) has distributed lists of “blockchain-friendly” banks — including DBS and HSBC — yet account rejections persist. Banks remain cautious about anti-money laundering (AML) risks and reputational exposure.
Some entrepreneurs now rely on third-party intermediaries who specialize in disguising crypto-related businesses during bank applications — charging between HKD 20,000–40,000 per successful onboarding. These shadow consultants often work with major banks behind closed doors.
As one frustrated operator noted:
“The Investment Promotion Office wants us here. The SFC welcomes us. But when it comes to banking, we’re treated like pariahs.”
This disconnect between pro-innovation policy and conservative financial gatekeeping creates a bottleneck for real business operations.
Why Hong Kong Has No “Sheep”
There’s a growing consensus among industry veterans: Hong Kong has no “lambs” — only “swords.”
Unlike retail-heavy markets where speculative hype drives quick gains, Hong Kong’s investor base is dominated by accredited professionals and ultra-high-net-worth individuals (UHNWIs). These are not casual participants; they are trained in risk assessment, portfolio diversification, and regulatory compliance.
Consider Ye Yizhou, founder of Frontier Rational Asset Management — one of Hong Kong’s first fully licensed crypto hedge funds. With over USD 100 million in AUM and a 9.2% net return in 2022 (a standout year when most crypto funds lost over 50%), Ye represents a new breed of institutional-grade crypto operator.
Trained on Wall Street and deeply familiar with both traditional finance and blockchain cycles, Ye warns newcomers:
“Hong Kong isn’t for everyone. You don’t just ‘drop in’ from traditional finance expecting an easy win. You need real edge — strategy, execution, resilience.”
His fund’s success reflects a broader trend: institutionalization. More professionals with Ivy League backgrounds and finance pedigrees are launching regulated funds targeting wealthy Hong Kong clients. They’re not chasing quick flips — they’re building long-term strategies around Bitcoin ETFs, stablecoins, and derivatives.
In contrast, downstream Web3 apps — especially GameFi projects promising “play-to-earn” profits — struggle to gain traction. Projects like STEPN, which once generated hundreds of millions in user value before collapsing, rely on continuous inflows of retail investors.
But in Hong Kong?
“There are too many sharp minds,” said one veteran. “Everyone’s trying to be the predator. No one wants to be prey.”
What Lies Ahead?
Despite setbacks, Hong Kong’s crypto journey isn’t over.
Over 150 Web3 companies have settled at Cyberport in the past year, according to Financial Secretary Paul Chan. The SFC continues refining its framework — with upcoming regulations expected for stablecoins and spot Bitcoin ETFs.
The message is clear: Hong Kong wants serious players — those capable of meeting global compliance standards while driving innovation.
Frequently Asked Questions
Q: Can foreign crypto companies operate legally in Hong Kong?
A: Yes, but only if they comply with SFC licensing requirements and establish a physical presence. Operating offshore without registration is not permitted under current rules.
Q: Are retail investors allowed to trade crypto in Hong Kong?
A: Since June 2023, only professional investors can trade most crypto assets on licensed platforms. Retail access remains limited to enhance investor protection.
Q: What types of crypto businesses are thriving in Hong Kong?
A: Licensed exchanges, hedge funds, asset managers, and custody solutions are seeing growth. Speculative or unregulated DeFi/GameFi projects face strong headwinds.
Q: Is it possible to open a bank account for a crypto startup in Hong Kong?
A: It’s challenging but not impossible. Success often depends on transparency, documentation, and choosing banks pre-approved by HKMA as blockchain-friendly.
Q: How does Hong Kong compare to Dubai or Singapore for crypto businesses?
A: Hong Kong offers proximity to China’s capital markets and strong legal infrastructure but lags in cost efficiency and banking openness compared to rivals.
Q: Will Hong Kong allow spot Bitcoin ETFs soon?
A: Regulators have signaled openness. Several asset managers have filed proposals, suggesting launch could happen in late 2025 if compliance standards are met.
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Hong Kong may no longer be the wild west of Web3 dreams — but for disciplined innovators who value legitimacy over shortcuts, it’s becoming one of Asia’s most promising regulated hubs for digital finance.