About

We are a group of financial services players with common missions to build a digital marketplace for the FIs and startups to provide their services locally and abroad in a more effective manner

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The Rationale Behind

Symbiotic System with Traditional Financial System

In recent years, we have seen digital innovators’ original desire to overthrow or subvert the banks and financial institutions has been changed to a more engaging collaboration. On the other hand, banks and financial institutions are increasingly realize the need to partner with digital finance companies to innovate their business models and product offerings. A symbiotic ecosystem has slowly emerged.

 

A Four-wheel-drive Vehicle

If we imagine the development of the digital finance sector as a 4-wheel-drive car, then the following essential attributes are the 4 wheels of the vehicle:

 

1. Continual technology advancement

• for better products and services anytime, anywhere and anyhow 

 

2. Aggressive customer expectations

• for pushing digital innovation exacerbated by the covid-19 pandemic

 

3. Maturing business ecology

• for scaling up and self-evolution with serious market capital support

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4. Robust regulatory landscape

• for defining the landscape and playing field by policies and regulations

 

With the engine supplying power to all four wheels, the vehicles can travel easily over difficult ground. However, owing to the speed of evolution and depth of knowledge involved in the transformation of the digital finance landscape, coupled with the initial lack of expertise and capacities, the Government is usually lagging behind industry development to lay down a regulatory regime.

 

Previous Ambiguous Government Stance

The previous ambiguous stance of the Hong Kong Government used to create a lot of FUDs (Fears, Uncertainties and Doubts) in the digital finance industry. Firstly, the banning of handling Bitcoin transactions in 2013 and domestic cryptocurrency exchanges in 2017 in Mainland China was thought to be followed by Hong Kong. Secondly, Hong Kong’s previous “opt-in” approach to virtual assets (VA) regulation resulted only few successful applications and raised the concern that Hong Kong was only developing an awkward halfway-house for VA regulation. As a consequence, we have seen many key players were attracted and domiciled in more hospitable jurisdictions such as Singapore and other destinations regionally. 

 

Current Supportive Government Policies

Fortunately, the Government has started to clear the FUDs by issuing a policy statement on the development of virtual assets (VA) in Hong Kong on 31 October 2022 and set a stage for the industry. The statement sets out the Government's policy stance and approach towards developing a vibrant sector and ecosystem for VA in Hong Kong. It explains in detail its vision and approach, regulatory regimes, thoughts on investors' exposures, its pilot projects to embrace the technological benefits and financial innovations brought by VA, and the way forward. The statement also serves to demonstrate Government’s commitment and determination to explore financial innovations and promote the sustainable development of financial services across the whole VA value chain together with the global VA community.

 

Policies Implementation

We are glad to hear Government’s commitment to re-establish Hong Kong as a leading fintech hub regionally and to revive the retail crypto market. We are seeing the Government is exploring several pilot projects such as issuance of NFT for Hong Kong Fintech Week 2022, tokenization of Green Bonds, issuance of e-HKD and applications of smart contracts. Meanwhile, Hong Kong Monetary Authority (HKMA) will announce in due course on the regulatory regime for stable coins and the Securities and Futures Commission (SFC) will implement the new virtual asset service provider (VASP) licensing regime in early 2023. The first ETF crypto fund started trading on HKEx in mid-December 2022. We believe that if there is an opening in Hong Kong’s retail market and this becomes recognized as an accepted destination for Chinese crypto investment, Hong Kong would definitely become one of the most important and successful digital finance hubs in the world. 

 

Hong Kong Remains as a Digital Finance Hub 

After all, Hong Kong remains as an international financial centre with a highly digitized economy, a world-class financial and technical infrastructure, a robust regulatory framework and a dynamic business environment with many business opportunities and comprehensive funding support. The “Outline of the 14th Five-Year Plan for National Economic and Social Development of the People’s Republic of China and the Long-Range Objectives Through the Year 2035” (中华人民共和国国民经济和社会发展第十四个五年规划和2035年远景目标纲要) indicated a clear national support for Hong Kong's development into an international innovation and technology (I&T) hub, better integration into the overall development of the country as well as deepening of the co-operation between Mainland and Hong Kong in innovation and technology. Hong Kong is well-positioned to be the forerunner in embracing the emergence of digital finance. It is observable that after the announcement of the policy statement, there have been increased interests of ventures establishing here or relocating back from Singapore.

 

Digital Finance Service Providers – Startups and SMEs

Traditional banks and financial institutions typically provide general offerings for the entire market as one-stop-shop, but digital finance firms tend to focus on handling a targeted problem, a non-existent yet needed financial service or a group of underserved customers. Digital finance companies usually do not require a large capital because many barriers to fintech startups are not insurmountable. In fact, in a digital economy with so many software development tools, company size is less relevant. The very nature of fintech companies allows them to run on limited resources: they have fewer employees, they do not need to support outdated systems or customer service units, and they can focus only on one or several key areas, which allows them to avoid distractions and accurately manage customer satisfaction. Companies can also be built anywhere and the worker base can be distributed. This is levelling the playing field for entrepreneurs beyond the main tech centers. Many of the digital finance service providers are small and medium enterprises (SMEs). 

 

The Need for an Industry Association

The digital finance industry is therefore naturally siloed and fragmented with different MSMEs focusing on development of different niche products and services. In view of the nature of the industry, we feel a need to create and promote a network of digital finance firms and professionals for sharing knowledge, networking, collaboration, problem-solving, innovation, advocacy, and partnerships. The association will also be a unified voice on digital finance issues and issues affecting the industry such as to help shape the regulatory landscape. This will drive greater access to and use of digital financial services, increased financial inclusion and bring about an industrial ecosystem. 

 

The Formation of the Hong Kong Digital Finance Association

With the above background, we form the Hong Kong Digital Finance Association (HKDiFi) as an effort to bring together companies and professionals in the industry. HKDiFi is registered as a non-profit-making company limited by guarantee in Hong Kong with a voluntary membership. An organization is best defined by its objectives and the HKDiFi will seek to achieve the following objectives by a range of activities for its members:

 

Enhance Capacity

• To enhance members’ capacity on new technology, business model, regulations and entrepreneurship 

Promote Communications

• To build a members’ platform for networking, sharing, learning, collaboration and partnerships for cross-pollination effect

Consolidate Voices

• To represent members in a collective voice on industry issues and policies

Encourage Governance

• To promote members’ good governance, standards and best practices

Inspire Business 

• To identify, facilitate and catalyze synergies and opportunities for members

 

In order to achieve its objectives, the Association may do the following activities:

• To conduct training seminars, courses, webinars etc.

• To influence the government for important issues affecting the industry

• To organize networking and party events 

• To establish focused groups or committee for topical exploration

• To collaborate with other societies and associations