Hong Kong is actively reaching out to Canadian crypto and Web3 startups, promoting its favorable business environment at Collision 2024, a major tech conference held in Toronto, Canada. Government entities from Hong Kong, including the Hong Kong Economic and Trade Office in Toronto (Toronto ETO), Invest Hong Kong (InvestHK), and StartmeupHK (SMUHK), collaborated to showcase the city’s robust technological infrastructure and business-friendly policies.

Hong Kong's Appeal to Canadian Startups

Emily Mo, Director of the Toronto ETO, led the presentation, emphasizing Hong Kong's strategic advantages for startups, particularly those in the tech and Web3 sectors. Mo pointed out that Hong Kong offers significantly lower tax rates compared to Canada, creating an attractive financial environment for emerging businesses. Furthermore, Hong Kong's regulations are designed to support "pre-commercial specialist technology companies," making it an ideal destination for innovative startups looking to scale.

Mo elaborated on the diverse opportunities in Hong Kong, stating:

"Hong Kong offers a vibrant ecosystem for Web3 and virtual asset developments. The city is becoming a hotspot for advancements in fintech, health technology, green technology, and property technology, not only within Hong Kong but across the broader Asian market."

Supportive Regulatory Framework and Funding Opportunities

In addition to favorable tax rates, Mo highlighted the long-standing tax treaty between Canada and Hong Kong, which aims to prevent double taxation and encourage cross-border business activities. This treaty ensures that Canadian businesses operating in Hong Kong can receive both public and private funding, further enhancing the attractiveness of setting up operations in the city.

Hong Kong's Commitment to Web3 Development

The Hong Kong Legislative Council has recently demonstrated its commitment to the Web3 and virtual asset sectors by establishing the Subcommittee on Web3 and Virtual Asset Development. Announced by council member Johnny Ng Kit-Chong, this subcommittee aims to foster the growth of Web3 technologies by seeking balanced, comprehensive feedback on technical, legal, and regulatory aspects. The goal is to create a cohesive and supportive environment for Web3 innovation, underpinned by robust and clear regulations.

Challenges and Regulatory Compliance for Crypto Exchanges

Despite these supportive measures, Hong Kong has also tightened regulations on crypto exchanges. In May, all crypto exchanges operating without a license were mandated to shut down. While over 20 exchanges initially applied for licenses, many withdrew after struggling to meet the stringent requirements, including Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) measures.

Gate.HK, a significant Hong Kong-based cryptocurrency exchange, announced its intention to relaunch after restructuring its platform to comply with the new regulatory standards. The company stated:

"Gate.HK is undergoing significant changes to align with Hong Kong's regulatory requirements. We are committed to resuming operations in Hong Kong and contributing to the virtual asset ecosystem once we secure the necessary licenses."

Prominent global exchanges, such as OKX, Huobi HK, and Bybit, were among those that retracted their license applications, underscoring the rigorous nature of Hong Kong's regulatory environment.

Hong Kong’s Vision for the Future

In summary, Hong Kong's concerted efforts to attract Canadian crypto and Web3 startups highlight its ambition to become a leading global hub for technological innovation. With its favorable tax regime, supportive regulatory framework, and commitment to fostering Web3 developments, Hong Kong presents a compelling proposition for startups seeking to expand into the Asian market.