Edited by Wu Shuo Blockchain

This episode features a roundtable discussion on Hong Kong and mainland policies at the Finternet 2025 Asia Digital Finance Summit. The panelists are Colin Wu, founder of Wu Blockchain; Kevin Cui, executive director and CEO of OSL Group; Patrick Pan, senior advisor to the chairman of China Renaissance; and Livio Weng, executive director and CEO of Newfire Technology.

The guests explored the impact of policy changes in Hong Kong and mainland China on the Web3 industry, particularly the market performance of innovative financial instruments such as Bitcoin, stablecoins, and DAT (Digital Asset Treasury). They analyzed whether the current market is at a critical juncture, transitioning from a bull market to a bear market, and the market prospects and challenges of DAT against the backdrop of price volatility in US stocks and Bitcoin, as well as policy restrictions on stablecoins. The guests also shared insights into the different policy directions in the crypto industry in Hong Kong and mainland China, and Hong Kong's proactive efforts in gradually relaxing regulations and promoting financial innovation.

Is the current market at a turning point between bull and bear markets?

Colin: The market has indeed reached what many consider a turning point. For example, yesterday the co-founder of AllianceDAO believed that the vast majority of traders and institutions around him were starting to be bearish. In the last two days, especially in the past 12 hours, the market has seen a certain decline. Do you think the industry has reached a turning point from bull to bear, or is this just a temporary dip, and it may return to a bull market trajectory afterward?

Kevin: First of all, let me clarify that this is not financial advice. Actually, I haven't done contract trading for a long time. If it's a leveraged product, everyone should be aware of the risks. We used to have a saying, "Cherish life, stay away from contracts." Looking at the market trend, I personally don't see any signs of a shift from a bull market to a bear market. If Bitcoin falls below $100,000, I personally believe it would be a buying opportunity. Because in the long run, the overall growth trend of the market hasn't changed; that's my personal view.

Patrick: My view on the market is that this cycle is changing dramatically. As everyone knows, Bitcoin is basically the bellwether of the entire market, and the market largely follows Bitcoin's cycle. Generally, there's a four-year cycle, and we've previously talked about "one bull market and three bear markets," meaning one year of bull market and three years of bear market in four years. But I think the current cycle might be different. Because of the policies of the Trump administration, such as the Genius Act, I generally predict that the market cycle will be more balanced, perhaps two bull markets and two bear markets, rather than the traditional "one bull market and three bear markets."

Therefore, I now believe the market is in the middle of a bull market. It's neither the highest point nor the lowest point, so everyone will be more cautious. The core message is: don't chase the highs. If the market corrects, it will actually be a very good opportunity. This is my assessment of the market.

Livio: Our views are quite aligned. The market cannot possibly have fully entered a bear market, nor is the bull market over. More likely, after a rapid rise, the market needs to pause and enter a consolidation phase. From a macro perspective, the total supply of stablecoins continues to grow, and other entities such as sovereign wealth funds, listed companies, and mainstream institutions are also buying them. Meanwhile, the Federal Reserve's interest rate cuts are ongoing, so the macro environment isn't as bad as it seems, and other assets like US stocks and gold are performing well.

However, the crypto industry still faces some challenges. One is the recent massive market volatility, which caused prices to rise too quickly; for example, Ethereum surged from over $1,000 to nearly $5,000. Such rapid increases will inevitably lead early investors who bought in at lower prices to cash in their profits. This is a natural market phenomenon; no market can rise forever.

Furthermore, the industry is also facing significant challenges. For example, the recent market crash led to a decrease in the total amount of open positions and a substantial reduction in liquidity. Some core institutions and key players experienced bank runs, directly impacting market liquidity. Subsequently, a series of problems occurred within the industry, including the Balancer hack and Streaming issues, all of which negatively affected the healthy development of the industry. Additionally, frequent trading by large on-chain investors and the intervention of certain political forces have also influenced market trends.

These factors have made many smart money investors who originally planned to enter the market hesitant. Many are beginning to worry that they might become targets of political manipulation, with the possibility of major upheavals leading to a market crash – a shift in confidence that has a significant impact on the entire industry. However, according to recent data, the Fear & Greed Index has fallen to the 20s, which usually indicates that the market has been over-feared, and many smart money investors may see a healthy investment opportunity at this point. Therefore, fear and greed coexist, and sometimes extreme market sentiment can actually create a rebound opportunity. As Patrick just mentioned, the market still has a chance to recover; it just needs some time to adjust.

Returning to Patrick's point, this doesn't mean the bull-bear cycle has reversed; the characteristics of future bull and bear markets may be blurred. Past bull and bear markets were primarily influenced by the Bitcoin halving cycle, but the impact of the four-year cycle on the market is now weakening. The involvement of traditional capital has also made the market more complex, and future cycles may be less distinct, with the characteristics of bull and bear markets becoming more ambiguous.

Overall, I don't think the current market situation is particularly pessimistic.

DAT's overhyped market and cooling

Colin: Next, let's discuss DAT, which is of great interest to everyone. We've seen Tom Lee's Bitmine still buying aggressively every Monday, but the price of Ethereum continues to fall. Could Bitmine become the next micro-strategy?

To the three guests here, your companies are all deeply involved in DAT-related businesses. There's a lot of discussion about DAT in the market right now, and regulatory feedback varies. Even Tom Lee himself has said that DAT may be on the verge of collapse. Of course, his rhetoric is consistently quite radical. So, what are your own views on DAT at this stage? After a period of rapid growth, does it still offer ample opportunities, or has it entered a phase of natural selection?

Livio: Regarding DAT, I think it needs to be viewed from two perspectives. First, DAT was indeed an overhyped new concept in the previous phase. After the market cooled down, we saw a lot of hot money being liquidated, which caused market doubts. But in essence, DAT remains an important Pareto improvement for the industry.

In the early days, from 2013 to 2017 and 2018, people could only buy cryptocurrencies through exchanges, which had very high barriers to entry. Many people needed to trust these platforms and even needed to bypass internet restrictions to access them, plus it was difficult to get funds in.

Then, in the last two years, the emergence of ETFs has made it easier for traditional capital to enter this market. Although many funds believe that ETFs are not within their trading scope, a large number of funds and traditional capital are already using the stock market to buy stocks instead of buying cryptocurrencies, or acting as a lightweight channel for buying cryptocurrencies. This is a better channel for traditional investors.

As Xiao Feng (Chairman of Wanxiang Blockchain) once said, ETFs are good, but DAT is even better, capable of playing a more significant role, as evidenced by companies like MicroStrategy. Currently, I believe we are in the validation phase. In exceptionally strong market conditions, the upside potential for DAT is significant; many DATs can see their mNAV (market net asset value) reach several times, two, or even three times their intrinsic value, demonstrating its premium. However, during market downturns, we need to pay attention to the downside risks of DAT. We need to verify whether DAT will collapse. If it can weather this correction, it will maintain a good premium as the market recovers, proving its business model.

Based on recent data, we can observe whether the mNAV of leading DAT companies significantly falls below 1. If not, then the business model of DAT companies will be able to establish itself in the industry, and they will have better opportunities in the future. In contrast, those smaller, less liquid DAT companies may struggle to survive in the market. Therefore, if you want to participate in DAT, it is recommended to choose leading DAT companies.

Patrick: I'd also like to briefly share my thoughts on DAT. I believe DAT is a very important innovative financial instrument, offering more flexibility in active management compared to directly holding currency or buying ETFs. However, DAT's overall development faces some challenges, especially the complexity of its operation and management.

The biggest challenge, as Livio just mentioned, is whether DAT's mNAV will fall below 1. This is a question worth considering. When a company's market capitalization is lower than its net asset value, where does DAT's value lie? However, based on analysis, I believe that DAT's mNAV cannot remain excessively high in the long term. For example, it's unlikely that it will remain at a level of 2 or 3 for an extended period. In the long run, over time, DAT's mNAV will return to a reasonable premium level, approximately 30%-50%.

A reasonable premium for DAT is 30% to 50%, which I personally believe is acceptable. If microstrategies can maintain this premium, it proves the market has potential. We can also see that the development of DAT has gone through several stages.

In its first phase, MicroStrategy can be seen as version 1.0 of DAT. In phase 1.0, DAT was essentially like a simple fund with few participants. Its main business was buying Bitcoin, especially when others weren't buying, it would still persist in buying, which made it extremely bullish.

For many funds and institutional investors, they don't require managers to bear the risk of market downturns; maintaining a super bullish stance can be an excellent hedging tool. However, when market conditions reverse, the losses from such strategies often far exceed the market's decline. If Bitcoin drops 20%, it could drop 40% or more. Next, DAT entered the 2.0 era.

From my perspective, DAT 2.0, at least, can be considered a version of Solana (supported by Tom Lee) and Ethereum-based DAT. Unlike version 1.0, version 2.0 adds features such as staking, yield, and passive income, making its operating model more attractive.

This approach differs significantly from Bitcoin investment; the passive income it generates is typically sufficient to cover operating expenses, including legal and auditing costs. Therefore, DAT does not require additional stock sales to maintain operations. We have seen companies like Tom Lee achieve great success in raising funds in the US stock market, particularly performing exceptionally well when they listed on NASDAQ.

However, we've also seen DAT's mNAV continue to decline, even falling below 1. This is largely a strategic consideration, designed to prevent later investors from entering the 2.0 phase. I believe that for DAT to move forward, it needs more innovation to overcome current challenges. Simple staking and yielding are insufficient; it requires more innovative business models, otherwise it's just a fund. As ETH's staking functionality is gradually implemented, DAT will face even more competition.

I believe DAT needs to move to version 3.0, or even 2.0 Plus. Beyond passive income and staking, it needs other new revenue models to remain competitive. Overall, I think DAT is currently entering a period of adjustment, and I strongly agree with Livio's view that only top companies will survive.

If leading companies are to survive, they need new business models. If they rely solely on buying and staking, the market may not accept it, and the premium will return to between 10% and 30%, far below the net value of directly holding the tokens.

Kevin: Yes, I think DAT is an innovative financial instrument. Compared to ETFs with cryptocurrencies as their underlying assets, DAT offers more flexibility in active management, including in terms of financing and operations. This flexibility makes it particularly sought after in the stock market, especially for some companies that are subject to policy restrictions and cannot directly hold cryptocurrencies or hold them more securely.

Therefore, I believe there will definitely be demand for DAT in the market. As a financial instrument, it has two sides. First, its sound operation is very important; second, if you invest in DAT, you need to be clear about which aspect you value. Different DATs have different crypto asset backgrounds and operating models, which is very important for investors.

Similarly, I agree with Patrik and Livio's second point: the ultimate outcome may be the "Pareto principle" (80/20 rule). Companies that grow to large size will inevitably be those that are well-managed and have high-quality assets, and these companies are limited in number. In the future, we may see more problems, such as the emergence of fraudulent activities. We may see DAT companies become more transparent, especially regarding their hosting and operating models; increased transparency could be an important direction for industry development.

Discussion on the impact of Hong Kong and Mainland policies on the Web3 industry

Colin: Next, we'll discuss the recent policy-related discussions. Over the past six months, there have been significant policy changes in both Hong Kong and mainland China. Hong Kong's policies have been relatively stable, and the approach has been gradual, with new regulations being introduced annually according to plans. This includes yesterday's release of new interpretations or regulations, which have made some adjustments and relaxations.

However, the policy responses in mainland China over the past six months have been quite contrasting, with this extreme change impacting the overall environment in Hong Kong to some extent. My personal observation is that almost all mainland state-owned enterprises and Hong Kong banks began establishing stablecoin-related teams, conducting research, applying for licenses, and recruiting staff, with unprecedented levels of collaboration. But overnight, regulatory agencies may have issued instructions to every company, instantly halting these activities. The atmosphere has even become somewhat "overreacted," with people hesitant to discuss stablecoins anymore.

On the other hand, Hong Kong's overall policy direction, including the enactment of laws and regulations, remains relatively stable and solid. Although some believe the pace may not be fast enough, we see positive progress being made gradually each year. This is something to be optimistic about. The next question is for everyone to share their views on the policy changes during this period, especially their predictions for the possible policy directions in Hong Kong and mainland China over the next six months to a year. Let's start with Kevin sharing his thoughts.

Kevin: I am not in a position to comment on the policies of mainland China, but from the perspective of Hong Kong's overall policies, although Hong Kong's policies may not be as radical, we have indeed seen that Hong Kong's policies are becoming more and more open and gradually able to proactively accept positive changes and trends in the international arena.

This is very welcome news for our company in Hong Kong, especially for the services we provide based in Hong Kong and overseas. With the release of the Liquidity Sharing Orders Department policy yesterday, I believe it will provide better liquidity for all our clients in Hong Kong, which is undoubtedly a very positive development for the Hong Kong financial market. From a holistic perspective, as the world's third-largest financial market, Hong Kong's gradual opening up of its policies is beneficial to the entire industry. While Hong Kong's regulatory policies may not necessarily be very aggressive, we are pleased to see some positive changes every year.

Patrick: My assessment of future policy is that the central government has clearly positioned Hong Kong as a key policy hub for the crypto industry. Firstly, Hong Kong has already obtained the authority to issue VATP licenses, began piloting stablecoins last year, and may announce the first batch of stablecoins this year, with more VATC-like licenses potentially available next year. Therefore, the central government recognizes Hong Kong as a policy center for the Greater China region and even the global crypto market; Hong Kong's positioning remains unchanged.

Furthermore, regarding policies on stablecoins and RWA (Real-World Assets), many central state-owned enterprises, state-owned enterprises, banks, and internet companies have participated in applications and projects for stablecoins and RWAs, demonstrating the positive impact of these policies. I believe that Hong Kong's policies may become more focused and tightened in the short term, particularly in helping local companies rapidly develop stablecoin pilot programs and providing liquidity; this direction is unlikely to change. Overall, Hong Kong's positioning and policy advancement, especially its promotion within the crypto ecosystem, are unlikely to change.

As for mainland China, I don't think it will be open to the crypto industry in the short term. However, Hong Kong remains the best place for companies in this industry, as it provides a favorable environment for the crypto industry to develop, whether through RWA or various tokenization methods.

Livio: Yes, I think this year has indeed seen a rare reversal, from an extremely open policy to a more controlled one. This situation actually happened in 2017 as well, when there were rumors about issuing licenses.

Colin: Back then, there were rumors that they were going to issue licenses to companies like Huobi, right?

Livio: Yes. Later, we discovered that as a series of events unfolded, people's understanding of this new phenomenon became more complex, and the associated risks increased. Especially given the complex situation in mainland China, for example, when stablecoins were first discussed in the middle of this year, the discussion was very heated, and many financial institutions were eager to try. However, one group became particularly active at this time. They began to launch various tokens under the guise of "government support," claiming they could double in value like Bitcoin, or even increase hundreds or thousands of times. As a result, many people were scammed.

In reality, what the government saw was these illegal financial activities using the concept of cryptocurrencies to deceive a new wave of investors, which led to the policy halt. Looking back at 2017, the policy control at that time wasn't about denying the value of Bitcoin and Ethereum, but rather a reaction to these chaotic phenomena. At that time, there were thousands of IEO and ICO projects, with many teams able to defraud large sums of money with just a simple PowerPoint presentation—a financial chaos similar to the P2P lending crisis of yesteryear. This was due to the complex national circumstances and the varying educational backgrounds and comprehension abilities of many people, leading to a series of financial scams.

Therefore, the central government decided to use Hong Kong as a testing ground, a decision based on a variety of considerations. Returning to Hong Kong, over the past three years, especially from 2022 to 2025, Hong Kong has been exploring the right policy path. From an industry perspective, the Hong Kong government's policies were relatively exploratory over the past three years, but since the beginning of this year, the policies have gradually found their direction. In particular, recent significant measures, such as opening up the exchange with Type 7 licenses, removing the 12-month restriction, and enabling global liquidity connectivity, all indicate that Hong Kong's regulatory policies are accelerating their opening to the industry.

Hong Kong's regulatory approach has been quite effective in addressing the challenges facing the Web3 industry. While regulating emerging industries is inherently difficult, especially in a rapidly developing sector like Web3, which has seen numerous risk events in recent years, Hong Kong's policies have been gradually implemented and steadily progressing, and the industry's future remains promising.

We have encountered regulators in countries like Japan, Singapore, and the United States, all facing the same dilemma—how to regulate effectively without excessive intervention. Although some have criticized Hong Kong's slower pace, these policies have ultimately been implemented. We have seen Hong Kong shift from a trial-and-error approach to gradually building regulatory confidence, with the government now able to appropriately open up the industry while ensuring its healthy development.

Over the next three years, Hong Kong's policies will become more mature, particularly in terms of regulation and industry development. Like a child transitioning from learning to walk to starting school, Hong Kong's crypto ecosystem will enter a more mature phase, and the entire industry will experience faster growth.

Colin: Okay, thank you everyone. I am very grateful to everyone for participating in today's event. I hope that everyone can work together to promote the development of the Web3 industry in Hong Kong and the Chinese-speaking world, and make this industry and community continue to grow.