Hong Kong SFC
Hello Sir and Madam:
It is wise for the Hong Kong government to be open to cryptocurrency technology and actively promote relevant policies. As a traditional financial center, Hong Kong deserves a leading position in the world of WEB3. If Hong Kong’s status as a financial center remains unshakable, Hong Kong’s economy will be as solid as a rock.
Cryptocurrency is an industry with a large span. Artificial intelligence is depth, and cryptocurrency is breadth. The iterative thinking formed by the Internet can only solve the “depth” problem but cannot solve the “breadth” problem faced by the current development. Solving these kinds of issues requires a “Satoshi”-style span of knowledge and careful planning in advance. Satoshi Nakamoto’s Bitcoin has been planned for 15 years, and it is easy for a headache doctor to make a joke.
The recent U.S. judgment on Ripple is confusing, and it is really incomprehensible.
Over the past few years, we have carefully planned and designed two projects:
1. “WEB3.0 Chainless Financial Platform” uses the idea and technology of transparent centralization to achieve decentralization, to realize that one’s assets can be held in real names and automatically inherited. It is easy to realize automatic custody by a third party. The use of a transparent platform makes the cost of regulation extremely low.
2. “DW20 Distributed Stablecoin” is the only stablecoin that can become the standard currency to cooperate with Bitcoin to realize the standard and become the nemesis of inflation. The DW20 distributed stable currency is just an application of the “WEB3.0 chainless financial platform”. The WEB3.0 chainless financial platform can easily upgrade the clumsy blockchain project, constituting a dimensionality reduction blow to Web 2.0.
Cryptocurrencies have broken through traditional regulatory boundaries. The most challenging problem is that cryptocurrency projects generally do not have conventional corporate structures; many tokens do not represent project value, this is true for Bitcoin, Ethereum, and even Ripple. It isn’t easy to regulate traditionally. Combining our research and understanding of the cryptocurrency field, we propose the following regulatory recommendations:
1. Regulate according to the degree of transparency and decentralization. The essence of decentralization is still reflected in openness. The more opaque it is, the more regulatory intervention is required. The more centralized, the easier it is to be unclear, and the more regulatory intervention is needed. For example, centralized and low-transparency USDT, USDC, and various exchanges require intense supervision. Fully transparent BTC and ETH do not need to be regulated and cannot be regulated. Centralized exchanges such as Binance have outstanding opacity and must be strictly supervised. The US SEC is accurate, but the method is not quite right.
2. The degree of credibility of the machine represents the degree of automation and transparency of the project. Where automation is not enough, supervision is required. For example, artificial operations, breaking the rules, and undisclosed operations in the dark require supervision.
3. Supervision based on the core team’s commitment: cryptocurrency does not rely on iteration to succeed, it must be carefully designed in advance, and the white paper must reflect the project’s central idea. The white paper can be changed but must be announced in advance. That is like an IPO prospectus. You can sue the team if they change the purpose at will because they can’t do it.
4. The team must have a real name, which represents responsibility.
5. Currency circulation is equivalent to listing, and the supervision of team members basically applies to the management regulations of listed companies.
6. The circulation and listing process is a simplified version of the IPO procedure.
7. Implement supervision on financial entrances and exits because platforms like Ethereum and others cannot manage them. But both USDT and bank deposits and withdrawals can be managed.
Attached are two white papers. We will start implementing the two projects in the white paper as soon as August. However, neither of these two projects has been Conducting public financing. From a regulatory point of view, the regulation of the two projects is also different. My opinion is:
1. The DW20 distributed stable currency does not represent the value of the DW20 system. It has no system and is an application project parasitic on the chainless platform. And the chainless system does not have the power to delist the project. DW20 also does not have an operating team, and it grows naturally like Bitcoin. But there is an invention team, and the white paper reflects the will of the invention team. Their regulation is individual regulation based on white papers and regulations. The project has a market-making fund that is regulated by financial regulations.
2. The WEB3.0 chainless financial platform currency represents the value of the project and has an operating team. But there are very few people, and most of the work is outsourced like Ethereum, which applies to the current management method of Ethereum. The transparency that Ethereum has makes it basically an autonomous system. A management regulation similar to that of a listed company can be issued to supervise the WEB3.0 chainless financial platform.
Ripple jurisprudence in the United States reminds us to fulfill our reporting responsibilities in advance. We can discuss this regulation together with all parties. Make the rules feasible.
Regarding the above proposal, I hope you can give feedback within one month, and I hope that it can help the development and supervision of the WEB3 field in Hong Kong.
Sincerely,
Good luck!
Zhu Weisha;
July 2023
Note: This article has been slightly modified.
Two departments of the SFC reviewed our project until the end of May 2024, and no problems were found and the project progress was not affected.
No response was made to our regulatory opinions. Our understanding is that the project complies with current policies.
