Bridging Borders: Hong Kong's Crypto Influence | KBW2023

all right we were supposed to have three people but we only have two now and um you know for the amount of things that we can talk about about Hong Kong we said maybe we should broaden the topic a little bit instead of just talking about Hong Kong let's talk about you know all of Asia right and since you know we're both inv Venture maybe one of the things that we can start off you know talking about is you know what do you think of investing in Asia right especially over the last nine months very very high level question what what what do you think about what are you seeing in this space I think uh first of all looking very good on the picture over there and I think we should probably start off with introductions right I think would like to know who you are and who I am and maybe that gives some more context on like where we should take this discussion the the photo is very photoshopped so uh not there anymore oh it's not there anymore okay so uh maybe you can go first David all right uh Hey guys so David again here uh started op crypto about two years ago but previously was leading Global strategy and Investments at HBY for four years and prior to that was an investment banker entrepreneur and what op crypto does is we early stage web3 Venture Capital firm mostly based out of the US but now have extension and have offices in Hong Kong and Beijing so what we do is really take some of the best talent to invest in in the Western Market and help them sort of Bridge to the Eastern Market to help them acquire users help them to with exchange listings and everything to do with partnership within the Asia Market good introduction man uh I'm David uh I sit at Kronos Ventures uh Kronos Ventures such as a ventures platform for a broader ecosystem um the parent company is uh called Kronos research uh Kronos research was started in 2018 with two people um and then it became a market maker uh focusing on crypto at the height of the bull market uh Kronos research probably traded in excess of you know 5 billion USD worth of volume on a daily basis uh the ventures business was started in early 2021 um it was back then it was maybe three or four people putting in 20% capacity just exploring the space fast forward to today uh We've invested in into about 70 projects 65 or 70 projects or so uh across a broad spectrum of web three um categories uh really interested in the space and looking forward to meeting you know interesting people all right introductions are done so with that kind of said you know going back to our original question right how do you feel see about you know investing in investments in general and with a particular focus on you know what do you see about investments in Asia versus the rest of the world yeah I think there's quite a bit of distinction between what is happening in Asia versus what's happening in the Western World so I think on the higher level um for those people that are not in the investment field is like the Western markets are a lot more infrastructure Focus right where the Asia Market is more consumer facing and in terms of like trying to find the best investments across both markets it's actually extremely hard but I think what we've built as a team in that we are 15 people across both markets and have really sort of knowhow in both sides and that you know I've spent almost equally amount of time in the US and also in Asia roughly around 16 years in both and a lot of it is still being able to like dissect the person as it on its own right so it's that's so that we think about it in terms of like whether it's like product Market fit at the earlier stage we we have a term that we think about our investment it's like founder market fit right it's like can the person that we're investing into really adequately build a product that can really cater into the into the different uh markets uh marketplaces that they're tapping into right so I think that's what's the core fundamental thesis for us is try to find the best person and to find them early and give them the right resources that they can use to succeed in the long run and capture Market that they're going for very very interesting right so like David I also have kind of like a East West background and I didn't really get into what I did before joining crypto in 2020 uh well for about 17 years uh before that uh you know I worked also in finance and Investment Banking private Equity uh at many different places uh mostly in the US uh over the last three years or so I would say that you know I've been traveling the world but spending a you the majority of my time in Asia right um um the qualities of Founders right uh across geographies are yet different but melded together by a few characteristics that you know I see as okay this is a great team and we want to you know really invest in a Founder uh some of the things that I think are very very interesting would be you know how charismatic is this person and yet it's not just the Charisma but can you button down and execute right I think these are very very important it's not just okay if you have a conversation is this guy coming off as a sharp person which I think they need to essentially check off that box immediately it's the things that you know you see that you observe that are kind of like you know a little bit uh outside of the box right to to go with that um so segueing a little bit right into what we're supposed to talk about on this topic right um and we we've kind of seen you know Hong Kong we've seen many things happen with Hong Kong right what do you see you know for Hong Kong as kind of like this regulated um you know uh regulated geography where everyone's looking at it's like okay please formulate these regulations so everyone looks upon right will where like what do you see as the growth of crypto in Hong Kong over the next two to three years or so yeah so I think when you think about Hong Kong as a territory you simply cannot ignore the fact and a Bohemia in a room in China right so I think ultimately China is by far the biggest crypto market in terms of scale and adressable market and Hong Kong is almost like a Gateway or portal to that market right and using Hong Kong as early building block to really test out some of the regulatory Frameworks some of the innovations that can be done in crypto and blockchain space particularly for the Hong Kong space that eventually can lead to more mass adoption within the China Market but also Hong Kong is now serving as almost a crypto Hub right kind of like what New York or San Francisco is like for us right it's actually drawing not only Capital to be invested in whether sort of some of the new approved like BDC or ethereum ETFs but more so like a lot of different Innovation centers that skar towards attracting developers and entrepreneurs to build protocols within the Hong Kong market that can serve to the rest of the APAC side right so I think as really Singapore tied in its regulations gave Hong Kong a lot of room for them to really open up and be more friendly to Founders looking to set up jurisdictions in Hong Kong and use Hong Kong as a satellite to serve the greater APAC market and even to as a bridge to the US right so I think that's where some of the merits where Hong Kong has to offer right now but obviously a lot of this stuff is still at infancy and you know we very much look forward to what Hong Kong can open up for the rest of Asia and the entrepreneurs that it's able to bring there very very interesting um outside of Hong Kong right do you see other you know jurisdictions playing you know different roles within kind of like the development of a crypto Project Life Cycle so for example you know if the Hong Kong is the gateway to interfacing with the West right which geographies do you think could be the Gateway of you know getting the right developers right at the right costs very friendly towards projects you know like like that how do you see you know other geographies yeah so I'm actually in terms of this particular I think Taiwan has done it very well in that like it has a very native crypto developer ecosystem and also uh a very sort of crypto interested retail consumer market right so Taiwan is pretty much the non-bias version that's really able to have both the Western and Eastern sort of DNA involved into intertwin within one country and I think that is the small sort of foundational layer that we can see as what really like crypto is all about right to be an industry Without Borders right so we shouldn't really think about like each individual Market on its own cuz I think whenever we think about crypto as a space it's like very very International right each and every single person as they launch a protocol it's aimed to go International almost from day one right so as much of like whether each important Community is segregated from each other there should be ways where we can break down some of those boundaries we can break down some of those language barriers and also break down some of those payment rails that crypto has a way to really facilitate uh global uh Commerce right and that's what really crypto is able to do is that like right now in traditional Financial rails is that like it's very hard to interact between country to Country right like if you want to buy something in another country it's very difficult to really transact with the merchants there but with crypto it's pretty much you know sending money or monitary value or any source of value as easily as you can send a text or do a credit card payment or do anything that is able to via exchange of value right and and that's extremely meaningful as we look to do Commerce across a bigger global scale and that really starts uh with the Asia Market because that's where consumers are actively spending money there's not really sort of the B2B uh sad side of it and it's really like a consumer first phasing economy very very interesting um and I think uh to go to your point David uh for Kronos research right um the vast majority of our developer base is actually based in taipe uh we have our headquarter office location there uh with more than you know a 100 people as part of uh Kronos research um despite the fact that the ventures theme is very Diversified internationally we think that for that particular core Universe of people it's better to be based in you know in taipe um in in Taiwan um so yeah so with with that said like may maybe we can like quickly go into you know people have been talking about Hong Kong and its comparisons to Singapore which is viewed as kind of like this other you know Hub where a lot of crypto projects are um you know featured in how do you see you know what do you see are the pros and the cons of Hong Kong versus Singapore yeah so I guess it depends on the audience right every single audience has different needs and that's why like both Industries or both sort of jurisdictions is a very blooming sort of ecosystem on its own right I would say that like Singapore definitely has a lot more VCS versus Hong Kong has a lot more Traders and people in financial services right so I think ultimately like Hong Kong is has a big sort of chafi industry as like some of the biggest banks globally across the world right they all have a presence in Hong Kong and that just makes you know anything related to sort of transition of uh trafi into defi something that like Hong Kong is a great hub for and Singapore is like a great hub for really a regulatory friendly environment for uh family offices asset managers uh institutional fund managers Venture capitalists Angel Investors people that are able to sort of enjoy the more tax friendly bracket but also be able to enjoy sort the friendliness to towards you know people of different jurisdictions that are coming into Singapore right I I think ultimately you know both have is pros and cons I think the cons is that like neither Market really has a big market in terms of like addressable market for developers like retail Community or a simply like sh size of per capita right so at the end of the day right A lot of it is really just the financial aspect of it on both sides but there's not that much innovation on either sides of the market which I think with sort of the new regulatory reform like we'll be able to see additional Innovation coming into those two jurisdictions awesome very very interesting as you see the regulatory reform um happen right over in the East and there's defining you know angles of Regulation so for example you know hash key and OSL getting their licenses um in Hong Kong right do you see Founders shifting away from the West to the east have you already kind of seen that or do you think that that will happen in the future yeah so actually over sort of this past year that I have been spending a lot more time in Asia I've actually be you know surprisingly uh been encountering a lot more Western Personnel within sort of asiia market right and a lot of this is like very very spread out I think already like Hong Kong and Singapore probably expect and see a lot of expats but I'm talking about like places like Indonesia Bali or like hoim Ming in Vietnam or even like in Japan right when I went for E Tokyo like almost half I wouldn't say half probably maybe onethird of the people that came are like from Western descent right and when I went to some of the hacker houses in Vietnam like probably maybe like 2 three years ago or even 5 years ago there probably you won't see a single Western person in the room and now I think a lot of Western Founders have really opted for a better standard of living in the Asia Market while being able to be a remote first team have better tax benefits and also be able to just lower significantly on the cost of R&D uh and really building up up AE team and reducing Runway right so I think that mentality has been taken a lot more by sort of Western teams where like some of our core team and the founders might still Western but they'll hire a lot of the backend team and developer team uh in Asia where uh it's a lot more productive it's a lot I wouldn't say more talented but like in terms of uh like the cost benefit it's much more Weighing on sort of Asia Market yeah so one thing to add to this right and I've seen a decent amount of projects right especially in the wake of the SEC investigation into binance and into coinbase right there's been extreme regulatory uncertainty part particularly in the US um and you know uh ever since that like I think in Europe right Micah is going to come out with like new you know more stringent regulations around crypto uh Founders who started their projects in these ecosystems are now thinking wait a minute you know what's going to happen um do we wait for uh the regulations to basically be you know 100% planted and you know and then we figure it out or do we go to a jurisdiction where you know uh where everything is going to be more defined right everything is starting to be more defined or is more defined and they know that you know you're you're not you know it's there's less gray areas and more black and white areas and you know they know exactly what to do and I think plenty of these projects are moving away from uh from the West uh to the East and figuring out what is the right G geography to thile themselves wow um okay so let's go back to maybe one more question about uh Hong Kong and I you know I really wanted to you know get a get a sense for this right um did you get a sense that after the web 3 conference right and after um all of you know um after the web3 conference did Hong Kong become a more bullish geography for crypto projects in general I guess it's a combination of after the web3 conference as well as you know the announcement of uh the regulatory you know changes right yeah so I haven't been back to Hong Kong since the web 3 Festival but definitely just being present during the web 3 Festival like it definitely did not feel like a bare market right so it very much felt similar to like 2018 consensus when you know everything was sort of um you know hype there's a lot of optimism there's a lot of people new that's coming into the space so I think obviously the aftermath of it it's going to take a lot more time to really um smooth sort of some of the regulations to be Paving the way for more people to come into the space but definitely it's a positive sign right and anytime that a country uh or S like Hong Kong can open up as much as it did and have really key government officials within sort of the highest ranks of political power come in and be sort of the voice backing um the ecosystem as a whole I think then like we're really heading towards the right direction and I'm honestly very excited to see you know what comes up next and I definitely plan to visit sometime later this year you know as we we talked about um projects being building in the in the East and then we also talked about projects shifting Focus from the West to the east right um as a lot of these things happen um do you see more of a global element in uh a lot of the newer projects right being um incubated right um do you see more of like instead of focusing on a particular geography they're more focused you know broadly right so I think that just the sheer notion of crypto as a space is like you don't necessarily have to restrict yourself to one specific jurisdiction at the time uh I think that's was something about the career Market where uh they're a bit more restrictive given that a lot of sort of Korean apps are very Silo from within but I think ultimately like there many more projects actually aiming after the career market so at the end of the day right it's ultimately depending on what you're exactly are building but whenever if I were to incubate a project or if I were to be an early adviser of something I'll always try and you know go for as much early initial market share as possible across the globe right and I think it doesn't really matter where the user is coming from because a lot of like 99% of the projects or protocols can be used online right and it doesn't matter if you're in China or in Korea or anywhere in the world like the product functions the same so with that mindset uh I think a lot of people as they build their products they should just go for like the crypto native users that can get and be power user for them early and that's something that we very much help as sort of the initial investors in any founder that we back is to be able to help them Source some of their early Founders and and it's actually really fascinating thing to have multiple culture and backgrounds all within one chat is that then like they able to really share some of that experiences with their friends and like that really compounds on itself so again like I wouldn't be too focused on sort of which jurisdiction it is but the founders do have to think about setting up their project in a jurisdictional family fashion so that they then can go after sort of uh users at a greater skill and mass across the globe got it very interesting um as you look at projects right across the globe right um and you look at projects in the East and you look at projects in the west right what are the key differentiating factors that you see that are characteristics of founding teams in the East versus founding teams in the west and how can like you know the the pros and the cons of each geography if they talk to one another how what what would you say as a vice that you know one side can give to the other yeah so I think for the West it's very much focused on the underlying infrastructure right um no one in the west is really building a consumer facing first product right it's always about how do we improve the underlying infr layer so that eventually applications can be built on top but no one is actually building those applications in the Western Market cuz they're so focused on really getting the infr layer right where whereas for the Asian Founders they're kind of waiting for some of the infr layer to be built so that they can be the ones to actually build on those infra to be able to make a consumer facing product that they can go out and attract users to be able to use these applications right so if they really were to work together then it will be kind of like a combination and the best of Two Worlds where like you have something that's robust on the underline layer plus like workable product that people are willing and um able to use right that they can actually apply to their day-to-day lives yeah to to add to that right I I do think um depending on the geographies right and depending on where the the core teams are there there will be strengths in different geographies for different things so for example teams uh founding teams that come out of San Francisco in the tech Valley are going to have strong developers right now the key for us as assessing would be okay your co-founders where are they where are they based right um you know if your co-founders are if everyone is in San Francisco and you're all strong developers I actually view that as a as a negative because you're you all think alike right um if your co-founders are you know based in Europe and has like a you know a a marketing degree right uh uh corresponding with like a strong developer talent I view that as a huge plus because you're covering each other's deficiencies right um and I and I see this as you so we prefer teams that are pretty Global with Diversified skill sets and I also think that the goto Market strategy across different geographies and how you kind of go to market right are quite different and so getting the right marketing talent for one geography may not not necessarily mean that you can you know have the right go to market in another geography uh there are some things you know um that can be reused but a lot of it is very different um okay um I give this uh okay very very interesting what are your overall thought thoughts and you know we we talked about this uh you know a little bit personally because I've known you for for quite some time right um what are your overall thoughts on chinese-based projects over the next three to four years uh I don't know why you specifically say 3 to four years but uh I think us as a venture fund we always think about even longer time skill like 5 to 10 years and Beyond obviously every cycle is usually three to four years but I think at the end of the day right like I wouldn't say I'm bullish on Chinese based entrepreneurs but I'm very much uh bullish on like Chinese entrepreneurs building the future web 3 that can apply to International markets right kind of like really where like Tik Tok has taken place and now it's like a global phenomenon like P right now has really taken global market share and having sort of their us variants that also able to capture uh the markets similar the way that they were able to capture in China so I think being able to just simply have the biggest addressable consumer Market in China and just the way that Chinese entrepreneurs thinks about Network effects about you know being consumer first facing first allows some to just dream a lot bigger in terms of like like at what scales their applications and the products that they build can achieve right so I do really very much believe in sort of the Chinese dream as you say it's really like being able to take something uh very little and grow it via Network effects and Via word of mouth and just really a very robust uh product that consumers really need and even including some like I wouldn't say Pony nomics but like there's ways to like create uh really great incentivization programs within uh the protocols and the projects themselves that really just encourage Mass adoption and encourage that variety element that you know Chinese project always seem to find the right way to get to get people uh talking right and I think a lot of those is geared and best fitted for uh Chinese uh Founders to have sort that level of mentality got it very very interesting um since we're here in Korea right um I wanted to get a sense for what your thoughts on the overall you know Korean ecosystem um what do you look for if you are looking you know at a project in Korea and how bullish are you yeah so I I first of all look for like what is the burgeoning ecosystem that's still left right so obviously after the the teror collaps everything kind of scattered and kind of went their own separate ways um there definitely needs to be a new uplift of like a strong ecosystem that can really uh cater to the Korean user base and I I believe that like some of the things that might be coming out that people can use in the future is that like as there's more Korean taxes that come into play Maybe defi is something that people can use that to really be more um tax efficient and also be non-c consal right with all of these things you're relying on centralized party you're relying on other people to hold and manage your assets you're you're relying on other parties that are not very transparent and opaque about how they're doing business I think the Korean market as a whole has suffered time and time again because of that lack of transparency so I think at the end of the day right like there has to be some level of community and I think this is something that particularly like the nft space has really um taken and drawn different communities to be under one common goal right or one common sort of uh archetype in that they all believe in sort of this type of vibe that like that Community can be there and stick for each other I haven't really seen that in Korea yet and I think that is pretty common in a lot of different uh sort of the biggest uh uh nfts that beenin uh viral across the world like you know puny Penguins you guys invested in obviously Bor Apes uh that I'm wearing on my shirt like isuki sort of in Asia and I think like a lot of that like as a Korean market nothing has really stuck and but I do think that like there is that like Korean culture is really about being there for your brothers being there for family and being and sticking in sticking up for each other right so maybe nfts is a way where people can really be drawn together and really make a tighty Community from that right yeah very to to add to that really quickly um yeah I think Luna Tera as well as the theeg USC has hit the Korea Community hard um Korea does have uh you know a number and the percentage of like retail Traders uh in the Korea Market is actually higher than a lot of other places so there's a definitely you know this dgen trading ecosystem and I totally agree that you know we need to wait for the next project to you know benefit from uplifting this ecosystem right I still think uh Luna you know Luna Tera us collapse is still in fresh in the minds of a lot of uh you know people that are in crypto in the community so that's it all right thanks all right thank you everyone for listening