Business trends: Yat Siu, Founder and Executive Chairman of Animoca Brands – The Future of Hong Kong Web3 Lies in Building a Sustainable Digital Asset Environment

NEW YORK, Nov. 12, 2024 (GLOBE NEWSWIRE) — MetaEra’s Hong Kong section has launched prominently, introducing the ‘Second Anniversary of Hong Kong’s New Crypto Policy’ event series. A central feature of this launch is the ‘Executive Dialogue: Pioneering Leaders of Hong Kong Web3.0,’ with this edition spotlighting an interview with Yat Siu, Founder and Executive Chairman of Animoca Brands.

Yat Siu, co-founder and executive chairman of Animoca Brands, is a leading figure in the blockchain and gaming industries. He serves as a member of the Hong Kong government’s Web3.0 Development Advisory Committee and is actively involved in promoting digital property rights and decentralized technologies. With extensive experience in technology and entrepreneurship, Yat co-founded several successful startups before founding Animoca Brands. He is regarded as a thought leader in integrating non-fungible tokens (NFTs) into mainstream gaming and advocates for the transformative potential of blockchain technology in creating a more equitable digital economy.

Key Insights

● Blockchain grants true ownership of digital assets, and Hong Kong can play a significant role in this field within its market economy framework.

● The success of shared networks will benefit the entire Web3 ecosystem, and Hong Kong can promote its prosperity by reinvesting in innovation.

● NFTs are not just a market but also a symbol of identity and culture, serving as a future tool to protect creators’ rights.

● Stablecoins act as a bridge between Web2 and Web3, converting traditional assets into Web3 assets and driving mainstream adoption.

● Hong Kong has immense potential and will nurture a new generation of innovative projects in the Web3 space.

● Hong Kong’s Web3 investment ecosystem is growing rapidly; while it may not match the scale of the U.S. and Middle East, it has vast development potential.

● Animoca Brands operates in compliance with local regulations, but since it does not handle customer assets, its compliance burden is significantly lower than that of exchanges.

● Hong Kong is poised to become a global Web3 hub, but further forward-looking actions are needed to maintain its competitiveness.

● Hong Kong holds great potential and can achieve rapid growth in Web3 by attracting talent.

● The open metaverse is progressing steadily, with the Telegram and TON ecosystem and high-quality Web3 games set to be major game changers.

● Web3 enables users to enhance their financial literacy, gaining a deeper understanding of the value of capital, assets, and digital property rights.

Interview

MetaEra：Animoca Brands is leading the charge when it comes to protecting digital property rights. Could you walk us through how the technology is being implemented and the tangible benefits it brings to content creators and rights holders? As a company with deep roots in Hong Kong, what improvements or advancements do you think Hong Kong could make to further strengthen its support for digital property rights?

Yat Siu： We use blockchain to create digital property rights because blockchain, which powers Bitcoin, enables true digital ownership. With Bitcoin, for example, you truly own it if it’s in your wallet; it can’t be taken from you. Blockchain technology makes this possible by recording ownership securely on a ledger. This technology can extend from store-of-value assets, like Bitcoin, to NFTs—non-fungible tokens, which are unique digital identifiers for items like art or game assets. NFTs represent the true provenance of digital items, similar to real-world items.

Previously, in the digital world, proving ownership outside a specific ecosystem was nearly impossible. For instance, if you wanted to sell an item from a game to someone outside that ecosystem, there was no way to record or transfer ownership reliably. In real life, you could sell a car with legal paperwork verifying the transaction, but digital items didn’t have such guarantees. Blockchain changes this, enabling verifiable digital ownership and allowing these assets to become capital.

Once an asset is recognized as a capital asset, it can appreciate in value, and you have certainty in its ownership, making it viable for investment. Ownership certainty is critical—if you don’t own it, there’s no incentive to invest. For example, in Web2, platforms like Instagram let you build a reputation, but you don’t actually own it; the value accrues to the platform. This is similar to landlords and restaurant owners—after years of operating a restaurant, the location, not the business itself, holds most of the value. Web3, however, enables you to own your digital property.

Digital property rights open new business opportunities, allowing people to build services on top of assets they own, just as real-world ownership allows new service layers like car rentals or customizations. Another aspect of ownership is its cultural value, which reflects identity. Many items we buy reflect who we are, like fashion or cars. Owning specific brands or items—like a Tesla or Lamborghini—signals certain qualities without needing explanation. In the digital realm, gaming items and skins carry similar meaning, though currently, we don’t own them; we rent them. We see enormous potential for a multi-trillion-dollar market built on digital ownership.

Regarding Hong Kong, it’s ideally positioned for this digital ownership revolution due to its capitalist framework. Capitalism relies on property rights, and Hong Kong, one of the world’s most capital-friendly cities, understands the value of property rights and capitalism. It’s also a financial center, much like New York, Dubai, or Singapore, all of which lead in Web3 and blockchain development. Hong Kong’s financial expertise and support for industry innovation make it a natural leader in this space.

With recent challenges, such as competition from Singapore, Hong Kong has an opportunity to define itself as a future finance hub by embracing Web3 and blockchain.

MetaEra：Hearing about how Animoca Brands is leading the way in protecting digital rights is truly refreshing! The tech and innovation behind it are such game-changers. Since we’re talking about tech applications, let’s move into the Web3 economy. What would you say is the toughest part of building a strong Web3 economic model?

Yat Siu：Animoca contributes to the ecosystem by building, investing, and collaborating within the space. Although we’re not a traditional fund, we’re one of the largest investors in Web3, with over 540 portfolio companies. This positions us as one of the biggest investors in Web3 overall. I see this almost like an ecosystem fund: by investing, we support and nurture entrepreneurs and builders, strengthening and making the ecosystem more resilient.

The ethos of Web3 and blockchain centers on decentralization, which we interpret as common ownership that’s widely distributed. A well-distributed and decentralized ecosystem promotes fairer competition and a more equitable market by leveling the playing field. In contrast, monopolies often leverage their control to dominate markets. Decentralization counters this by redistributing power, creating a fairer and freer market.

We support this vision of a “shared network,” meaning that by helping Web3 projects grow, the entire ecosystem benefits. For example, if Bitcoin hypothetically reached $100,000, the entire Web3 space would gain, not just Bitcoin holders, due to increased network value, transactions, and liquidity flow. Unlike in Web2, where the success of companies like Facebook or Google primarily benefits only them, Web3’s successes are more broadly shared, with value trickling down throughout the ecosystem.

Investing in Web3 is crucial for this growth. Imagine if every successful business in Hong Kong, for example, invested 5-10% of its profits into local startups. The startup ecosystem would thrive, similar to Silicon Valley’s model. Here in Silicon Valley, despite sometimes inferior infrastructure compared to Hong Kong, innovation thrives due to a high concentration of angel investors. It’s not only the large funds but also individual engineers and employees who often invest in multiple projects. This type of culture, where anyone could be an investor, is what drives innovation here.

In contrast, in Hong Kong—and much of the world—this investment culture is less common. People may prefer to invest in real estate or stocks rather than startups. In Web3, however, most companies and individuals who have made gains often reinvest in other projects, creating a flywheel effect that helps the ecosystem grow.

Regarding building in Web3, there’s no silver bullet, but a core concept is that the token offers access to a network effect. Tokens are network assets, like Bitcoin, which have both financial and application utility, creating a distinct dynamic compared to traditional assets. For instance, holding shares in Facebook doesn’t impact your Instagram usage, and having followers on Instagram doesn’t affect your shareholding in Facebook—they’re entirely separate. But in Web3, they’re unified: holding a token makes you a network stakeholder.

Owning a token means holding a stake in the network, not just in a store of value. This network asset is a unique type of asset that resembles owning a share in the network effect itself. The value of a network economy, like that of a token economy, grows through its users and utility, just as traditional economies do. Building in Web3 is essentially building a network economy, and understanding how to optimize for that is distinct from building a typical business. Many entering Web3 for the first time may not realize they’re creating a network economy, which is more akin to forming a country than merely running a business.

MetaEra：Building a great user experience and community is such a big part of this. Plus, NFTs have been central to that journey. Could you tell us more about the role NFTs play within Animoca’s ecosystem? And what new uses do you see for NFTs in the future?

Yat Siu：NFTs, as a technology, can be seen as a foundational shift, much like how MP3 changed music. NFT stands for “non-fungible token,” which is perhaps not the most appealing way to describe digital ownership. In the future, I don’t believe we’ll refer to them as NFTs anymore—we’ll likely just say “digital ownership.” This is why we use the term “digital property rights.” We believe this concept will ultimately be what matters. However, right now, we need to explain the technology, which is why terms like NFT are still widely used, even if they’re not fully understood by many.

Generally, we think of NFTs as stores of digital culture. They represent value beyond money; they’re not a currency or a store of value but a store of culture. And within this cultural store, there are different types of capital. Financial capital is straightforward, but there are other forms, like symbolic capital (such as a university degree), cultural capital (art and sophistication), and social capital (networks and friendships). For us, NFTs capture cultural, social, and symbolic capital. While meme coins may also represent some of these elements, NFTs hold more weight in symbolic and cultural aspects. An NFT can be compared to a Birkin bag, a Picasso piece, a Lamborghini, a Rolex, or even a Nike shoe—items that signify social identity and personal taste.

Because NFTs are unique, they have multiple applications for digital ownership, such as for art or game items. They can also be used for intellectual property (IP), protecting things like music, dance, or education rights as NFTs. This enables creators to embed legal protections for under a dollar, which is revolutionary. I see NFTs in the future as tools for protecting, enhancing, and growing intellectual property. Instead of a few rare NFTs, I envision billions of them, representing assets from property deeds to creative works, which can then be traded, transacted, and shared.

Currently, NFTs are a $10 billion industry. Although down from their 2021 peak, this remains significant growth from virtually zero just five or six years ago. NFTs have truly changed the game in terms of digital rights and transactions, especially in branded items like NFT Nike shoes, which bring unique symbolic value.

On another note, Animoca Brands is also active on the funding side, particularly in regions like Saudi Arabia and NEOM in the Middle East, which, along with the Asia-Pacific, are growth markets. These regions are open and friendly toward Web3, which makes them ideal for our expansion. Outside of gaming and Web3, we’re focused on two main areas: digital identity and education.

Through “Mocaverse,” we’re building a reputation layer in Web3. Reputation is crucial for building trust, as it enables people to do business securely, even without revealing personal details. Blockchain, after all, doesn’t show who the other party is; we only see wallet addresses. But to build a stronger network, knowing a counterpart’s reputation is essential. Imagine doing business with strangers in Hong Kong repeatedly without being able to build any rapport. That’s unsustainable. With Mocaverse, we’re creating a digital ID system that allows reputation scoring, so you can trust new business contacts even if you’re meeting them for the first time. This will increase trust, which is vital for our industry.

The second focus area is education, specifically tackling the student loan crisis. In the US alone, it’s a $2.2 trillion issue. We aim to use Web3 for better student financing solutions, which could help reduce costs and improve yields. These initiatives in digital identity and education will support the broader growth of games, DeFi, and the Web3 ecosystem as a whole.

MetaEra：Animoca Brands is actively engaged in Hong Kong’s stablecoin initiatives. How do you view the role of stablecoins in the blockchain ecosystem, and what are Animoca’s plans or perspectives on integrating stablecoins into its broader digital economy strategy?

Yat Siu：

We’re engaged in stablecoins because Hong Kong currently lacks a stablecoin framework. Together with Standard Chartered and PCW, we’re working to create a Hong Kong-based stablecoin to support the local ecosystem and instill confidence. Stablecoins, we believe, act as a bridge from Web2 to Web3, making it easier for users to convert into Web3 assets, as seen with stablecoins like Tether or Circle. This initiative aligns with Animoca’s growth towards becoming an institutional Web3 player, a role the industry still lacks and needs to develop further.

The importance of stablecoins lies in their ability to onboard users from Web2 to Web3 at scale. Stablecoins allow users to retain their assets in a familiar currency within Web3 and offer a straightforward way to “offboard” value as well. If someone generates value in Web3, converting it to a stablecoin is faster and safer than using exchanges, and it provides flexibility for further transactions or storage.

Our approach to stablecoins also aligns with mass adoption strategies, making asset management easier and accessible through blockchain technology.

Regarding a potential IPO, as a Hong Kong-based company, this market has clear advantages. Despite a sluggish capital market, Hong Kong remains one of the world’s largest. Given our headquarters here, it’s a logical choice. Although an IPO will take time, Hong Kong is likely to be an essential market for us when we’re ready. With its developing crypto policies and clearer regulations, Hong Kong offers a compelling venue for our future listing considerations.

MetaEra: Animoca Brands is actively involved in Hong Kong’s stablecoin initiatives. How do you view the role of stablecoins in the blockchain ecosystem? What plans or perspectives does Animoca Brands have on integrating stablecoins into its broader digital economy strategy?

Yat Siu:

Our focus on stablecoins stems from the current lack of a stablecoin framework in Hong Kong. We are working with Standard Chartered and HKT to create a local Hong Kong stablecoin to support the local ecosystem and build confidence. We believe that stablecoins act as a bridge between Web2 and Web3, making it easier for users to transition assets into Web3, as seen with stablecoins like Tether and Circle. This initiative aligns with Animoca Brands’ evolution towards becoming an institutional-grade Web3 participant, a role that remains underdeveloped in the industry and requires further growth.

The significance of stablecoins lies in their ability to guide users from Web2 to Web3 on a large scale. Stablecoins allow users to hold assets in Web3 in a familiar currency form and offer a simple way to transfer value. If someone creates value in Web3, converting it into stablecoins is faster and safer than using exchanges, providing flexibility for further transactions or storage.

Our strategy with stablecoins also aligns with the idea of mass adoption, simplifying asset management through blockchain technology to make it more accessible.

MetaEra: There has been news that Animoca Brands is considering going public in Hong Kong recently. Given the overall weakness of the Hong Kong capital market, how do you view the impact of Hong Kong’s new policies on the company’s decision to go public? What specific advantages do these policies bring to the company’s market expansion?

Yat Siu:

Regarding a potential Initial Public Offering (IPO), as a company headquartered in Hong Kong, there are clear advantages here. Despite the capital market’s weakness, Hong Kong remains one of the largest markets globally. Given that our headquarters is here, choosing Hong Kong is a logical decision. Although an IPO takes time, when we are ready, Hong Kong is likely to be a key market for us. Hong Kong is developing more comprehensive crypto policies and clearer regulations, which provide a favorable opportunity for our future listing.

MetaEra：With Animoca Brands having invested in nearly 540 projects, what specific sectors are you focusing on next? Do you think Hong Kong has the potential to foster a wave of new, innovative projects? And what’s your take on the current sentiment in the Web3 VC community, where there’s talk of hesitancy around backing projects led by Chinese founders?

Yat Siu：

Overall, sentiment in Web3 is very positive. We’re seeing a rapid increase in Web3 development, with a notable number of Chinese founders leading the way. The Web3 model, with its emphasis on property rights and a capitalist framework, resonates strongly with the Chinese business mindset, especially among people in Hong Kong and the Greater China region.

While many of these founders operate outside of China, they bring a solid understanding of the model, building companies in locations like Hong Kong, Singapore, and beyond. Additionally, many prominent Web3 companies overseas are run by ethnic Chinese or Chinese nationals. This stands in contrast to Web2, where relatively fewer Chinese founders made an impact globally, though there are notable exceptions like Nvidia’s Jensen Huang.

In Web3, however, Chinese founders have a substantial presence globally. The world’s largest exchanges, such as Binance, OKX, Bybit, and Bitget, are primarily Chinese-founded, with the exception of Coinbase. This reflects a significant trend: Web3 attracts a large percentage of Chinese entrepreneurs, which is fascinating. The capitalist principles of Web3 seem to align well with the intuitive understanding of many in this community.

Hong Kong’s investment community is significantly larger and more distributed for Web3 than for Web2, meaning there’s substantially more funding available for Web3 startups here. This funding advantage allows Web3 companies to scale faster and grow more robustly in Hong Kong than Web2 companies. Additionally, many successful Web3 entrepreneurs reinvest their earnings into new projects, fostering a natural cycle of reinvestment within the community.

While Hong Kong’s Web3 investment landscape isn’t yet on the scale of the U.S. or the Middle East, it has considerable potential. Hong Kong is home to substantial wealth, with younger generations of family offices showing strong interest in digital assets, Web3, and blockchain. As a global finance hub, Hong Kong has a deep understanding of financial systems, aligning well with the principles of Web3 and blockchain.

Although Hong Kong has traditionally been more focused on public markets than private equity, blockchain and tokenization offer a fast-developing public market alternative. This familiarity with liquid markets gives Hong Kong a distinct advantage in supporting blockchain ventures.

MetaEra: Animoca Brands’ extensive investment strategy is truly impressive! As global interest in blockchain continues to grow, we also see increasing regulatory attention. How does Animoca Brands handle compliance issues in different regions? How does Hong Kong’s approach differ from other markets? Additionally, how do you collaborate with other companies or government agencies to promote the development of Web3 and the metaverse?

Yat Siu:

Regarding regulation, global frameworks are still evolving. Although no clear model has emerged yet, Hong Kong is progressing in parallel with places like Dubai, Singapore, Tokyo, and Liechtenstein. Most regulatory efforts are focused on fungible tokens, emphasizing liquid assets, while NFTs are generally seen as consumer assets rather than financial instruments and are thus largely unregulated.

In certain markets, we need to assess whether we will operate locally, which of course requires adherence to local regulations. We have dedicated compliance and legal teams to manage this. However, generally speaking, fields such as Web3, gaming, NFTs, education, and digital identity are not subject to stringent regulatory requirements. Regulators have indicated that these industries fall outside the current regulatory framework, meaning we face a much lighter regulatory burden compared to exchanges.

Unlike exchanges, we do not handle client assets or manage asset segregation. Our investments are made using our own balance sheet, and any asset management is backed by our funds. This is significantly different from exchanges, as they must comply with strict regulations for third-party asset custody and management. Therefore, although we comply with local laws in our business areas, our regulatory obligations are not as extensive as those of exchanges.

MetaEra: Animoca Brands’ commitment to compliance truly reflects its focus on sustainable and long-term growth! How do you view Hong Kong’s evolving role in the global cryptocurrency field? Hong Kong’s prominence may have diminished somewhat during the Web 2.0 era, but with the rise of Web 3.0, do you think it has the potential to reclaim its title as the “Pearl of the Orient”? Could Hong Kong’s new crypto policies possibly set a benchmark for global regulation?

Yat Siu:

Hong Kong aims to become a global Web3 hub, though there is still a lot of work to be done. To achieve this goal, Hong Kong needs to adopt a more forward-thinking approach than other regions. The city has a rich pool of talent in this field, making it easier for people here to understand the value of the token economy—a concept that might be more challenging for outsiders. I believe Hong Kong has enormous potential.

Web3 is still in its early stages, and it’s impressive to see the companies that have already started or are being built here. Many companies have experienced significant growth, which is particularly remarkable—especially considering that before Web3, Hong Kong wasn’t a major tech hub. Now, Hong Kong has developed real momentum. However, it needs to maintain its growth advantage to stay competitive. Although it’s not yet the largest platform—places like Dubai and, to some extent, Singapore are still in the lead—Hong Kong is progressing rapidly. Attracting more talent will be key to its continued growth.

MetaEra：As blockchain gains more global traction, regulatory scrutiny is also ramping up. How is Animoca Brands ensuring compliance across different regions? Do you approach compliance differently in Hong Kong versus other global markets? And how do you collaborate with other companies or government bodies to promote the growth of Web3 and the metaverse?

Yat Siu：In certain markets, we need to assess if we’ll operate locally, which of course requires compliance with local regulations. We have a dedicated compliance and legal team to manage this. Generally, however, areas like Web3, gaming, NFTs, education, and digital identity are not subject to strict regulatory requirements. Regulators have indicated that these sectors are outside the current regulatory framework, which means we face a lighter regulatory burden compared to exchanges.

Unlike exchanges, we don’t handle customer assets or manage asset segregation. Our investments are made with our own balance sheet, and any asset management is funded by our capital. This differs significantly from exchanges, which must adhere to stringent regulations for the custody and management of third-party assets. Therefore, while we do comply with local laws in our business areas, our regulatory obligations are not as extensive as those of an exchange.

MetaEra：How do you see Hong Kong’s role evolving in the global crypto space? The city may have dimmed somewhat during the Web2.0 era, but do you think it’s poised to reclaim its status as the ‘Pearl of the Orient’ with the rise of Web3.0? And could Hong Kong’s new crypto policies set the stage as a global regulatory benchmark?

Yat Siu：Hong Kong definitely has that potential. Web3 is still in its early stages, and when we look at the companies that have already started or are currently building here, it’s impressive. Many of them have scaled significantly, which is remarkable—especially considering Hong Kong wasn’t a major tech hub before Web3. Now, there’s a real momentum. That said, Hong Kong needs to maintain its growth edge to stay competitive. While it isn’t the biggest yet—places like Dubai and, to some extent, Singapore are still leading—Hong Kong’s progress has been rapid. Attracting more talent here will be crucial for its continued growth.

MetaEra：As a key player in the industry, how do you see blockchain and metaverse technologies evolving on the global stage? Are there any emerging technologies you believe could be game-changers in the near future?

Yat Siu：The Metaverse is still growing, especially within Web3. I think a lot of skepticism arose when Facebook’s metaverse didn’t perform as expected, which led many to think the metaverse itself was failing. However, the ‘open metaverse’ is actually thriving, with an estimated $18 billion market cap, largely led by gaming. The areas I believe will be transformative include platforms like the Telegram ecosystem, which is fostering rapid growth in Web3 products. Because it isn’t limited by the restrictions that Apple, Google, Facebook, and Steam impose on Web3 blockchain and NFTs, it’s enabling entirely new levels of integration for users.

Another key area is gaming itself, particularly with high-quality games that bridge Web2 and Web3. Now, we’re seeing games that Web2 players enjoy without even knowing they’re Web3-based. For instance, ‘Off the Grid’ by Gunzilla, a game from our portfolio, could rival the popularity of PUBG and Fortnite. Gamers love it because it’s fun—not necessarily because it’s blockchain-based. This approach can seamlessly bring Web2 users into Web3 through experiences they’re already passionate about, like gaming.

As for technology’s evolution on the global stage, I think the next phase will involve continued development in blockchain that integrates user-friendly, immersive experiences. With Animoca being a leader in this space, we’re closely following and innovating on emerging tech that could redefine both the metaverse and gaming.

MetaEra：As a Web3 entrepreneur, what would you like to say to newcomers from the Web2 world?

Yat Siu：Broadly speaking, what I want to convey is that when you transition into Web3 and become a Web3 user, you also develop greater financial literacy. In other words, you gain a deeper understanding of money, capitalism, digital property rights, and become more skilled in managing financial matters. I see the real revolution in Web3 as financial onboarding and literacy: moving from Web2 to Web3 teaches you new skills, such as understanding the value of assets, property, and money, and how they work. This makes you a better investor and your own portfolio manager—something typically not taught in school, despite money being one of life’s essential tools. Web3 offers democratized access to financial knowledge and skills. In essence, moving from Web2 to Web3 empowers you to become more financially literate and capable.

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soren.wu@metaera.hk

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